Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Cattle (Market Prices)

Mr. Hawkins: asked the Minister of Agriculture, Fisheries and Food whether, in view of the proportionately lower prices received for winter-yarded cattle sold in April as compared with grass-fed cattle sold in July, due to the changes in the seasonal scale of standard prices, he will take action to remedy the situation.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy): For several years cattle marketings in April have tended to be much heavier than in July and market prices have been lower. The changes in the seasonal scale, which were foreshadowed at the 1964 Review, were made to encourage a better spread of marketings over the year and I see no reason to alter them.

Mr. Hawkins: Is not the hon. Gentleman aware that yarded cattle are extremely expensive to produce, and that even before this alteration they left very little margin of profitability? Does he not feel that the only way to produce more beef is to give higher guaranteed prices, nearer to those being maintained on the Continent at present?

Mr. Hoy: The standard price is still higher in April than in July, although the differential has been narrowed. The higher costs for winter-yarded cattle as opposed to grass-fed cattle are still reflected in the guaranteed price. I would once more remind the hon. Gentleman

that full notice of the proposed changes was given a year ago.

Fish (Prices System)

Mr. Wolrige-Gordon: asked the Minister of Agriculture, Fisheries and Food whether he has yet agreed to a system of reserve prices for fish; and if he will make a statement.

Mr. Bruce-Gardyne: asked the Minister of Agriculture, Fisheries and Food whether he will now introduce a minimum pricing scheme for white fish.

Mr. Wall: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the progress of negotiations for a statutory minimum prices scheme for white fish.

Mr. Hoy: I would refer the hon. Members to the reply given by my right hon. Friend the Secretary of State for Scotland to the hon. Member for Aberdeen-shire, East (Mr. Wolrige-Gordon) on 26th May.

Mr. Wolrige-Gordon: Does not the Parliamentary Secretary realise that there has now been considerable delay in the introduction of this scheme, and that there is a great deal of unanimity in the industry about its desirability? Will he seek to bring it in as quickly as possible?

Mr. Hoy: Yes, Sir. We will bring it in as soon as possible, and negotiations are still going on.

Mr. Bruce-Gardyne: Can the hon. Gentleman tell us whether the Treasury has intervened to tell him that he cannot introduce this scheme? Could he come clean about this? The discussion has been going on for a very long time, and there is really no reason why it should not have ceased by now.

Mr. Hoy: Cleanliness is not in question. As I say, the negotiations are going on. If it interests the hon. Gentleman, I will be having a further meeting next week.

Sir M. Redmayne: Is the Parliamentary Secretary aware that we look forward to a debate on this subject, and allied subjects, and that I hope that he will represent to the Leader of the House that it must be before the House rises for the Summer Recess?

Mr. Hoy: As no one knows better than the right hon. Gentleman, that is a matter for the Leader of the House, but certain Orders will have to be laid, and a debate will take place.

Mr. Wall: Does the hon. Gentleman agree that it is essential to reach a decision on this matter before the industry puts its case in the Restrictive Practices Court, and does not that severely limit the time he has to consider the matter? Will he guarantee to make a statement before the end of the Session?

Mr. Hoy: Of course, the question of price fixing will come before the Restrictive Practices Court, but it will be for the Government to make their decision on this issue as soon as they possibly can.

Mr. James Johnson: Whatever decision the Minister takes, will he bear in mind the need to increase consumption of fish at home? Without a guaranteed home market, the deep sea fishing fleets of ports like Hull will not flourish.

Mr. Hoy: Fish consumption is increasing and, of course, it will always be our endeavour to see that it keeps on increasing.

Milk (Prices)

Mr. Evelyn King: asked the Minister of Agriculture, Fisheries and Food what is the price per gallon currently paid to Dorset farmers for milk; and whether he will increase it.

Mr. Gower: asked the Minister of Agriculture, Fisheries and Food what is the price now being paid for milk to farmers in Wales; and whether he will increase the price.

Mr. Hoy: The price payable to Dorset milk producers for June is 27·86d. per gallon. For producers in North Wales, it is 27·65d.; in South Wales, 27·61d.; and in Monmouthshire, 27·94d. The prescription of regional monthly producers' prices is a matter for the Milk Marketing Board.

Mr. King: Will the hon. Gentleman use his influence to see that this price is increased? Is it not a fact that 40 per cent. of the small farmers earn less than £12 a week and that although a 1d. or 2d. on a gallon would make an immense difference

to farmers, the difference in the cost of living would be only marginal?

Mr. Hoy: We want to encourage farmers, and these figures show that they are getting a full 1d. extra, but these prices are fixed for areas by the Milk Marketing Board. I think that the hon. Member would be resentful if the Government attempted to interfere with that procedure.

Mr. Wingfield Digby: Is the Minister aware that in Dorset, this traditional dairy county, at these prices dairies are still closing, particularly those associated with small farmers?

Mr. Hoy: All I say in reply to that is that milk production continues to increase.

Mr. Gower: On a point of order, Mr. Speaker. I have been here all the time and Question No. 56 is in my name.

Mr. Speaker: I am very sorry, but I still find it desirable to maintain the rule I laid down until the House discusses this problem of Questions.

Farming Areas, West Suffolk (Minister's Visit)

Mr. Eldon Griffiths: asked the Minister of Agriculture, Fisheries and Food what plans he has for visiting the farming areas of West Suffolk.

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): I or my Parliamentary Secretaries are hoping to have visited every county agricultural executive committee and seen something of each county including West Suffolk by the end of the autumn.

Mr. Griffiths: Is the Minister aware that his Answer will be greeted with satisfaction in West Suffolk and that, although he ran into a boycott in East Suffolk, we are prepared to guarantee his safe conduct if he comes to West Suffolk? Will he face the fact that many farmers in West Suffolk are planning on the assumption of his Price Review costing a net reduction in income of £2 an acre and that if he comes to West Suffolk he will have to answer a very large number of questions?

Mr. Peart: I am always anxious to meet farmers, as I have repeatedly said. The Joint Parliamentary Secretary


addressed the National Farmers' Union at Ipswich on 12th January this year. I am anxious to get round the country and I have done so. No one can say that I am afraid to meet farmers. If the hon. Member will give me the support he said he would give, I will welcome it.

Pigs

Mr. Peter Mills: asked the Minister of Agriculture, Fisheries and Food how far the rise in the cost of pig food has affected the cost of pig production; whether he is satisfied with the present profit margins of pig keeping; and if he will make a statement.

Mr. Peart: The feed formula arrangements under the Fatstock Guarantee Scheme provide for the guaranteed price to be adjusted automatically as feed costs change. The cost of the basic feed ration has been increasing, but under the feed formula arrangements, compensating increases in the guaranteed price have been made during the current fatstock year totalling 1s. per score.
So far as profitability is concerned, all relevant factors were taken into account when the guaranteed price for pigs, and other features of the guarantee arrangements, were determined after the last Annual Review.

Mr. Mills: Does the Minister realise the serious position in which small pig keepers are at the moment and that it is virtually impossible to make a profit out of pig keeping? Does he realise that this is hurting the small farmer who has been hurt in poultry keeping and now is hurt in pig keeping? Will the Minister look at this matter, particularly the questions of imports of pork meat and feed costs?

Mr. Peart: As the hon. Member knows full well, the system of flexible guarantees has been approved by the industry. He must not complain that it works. In the 1965 Price Review we raised the middle band from 11¾ million to 12·8 million. It should also be remembered that the total subsidy for pigs last year was over £30 million. The purpose of the flexible guarantee is to prevent overproduction which would be bad for the country.

Mr. Scott-Hopkins: Does not the Minister agree that the feed formula is out of date and needs revising? Will he

agree that many pig producers are finding it extremely difficult to make a living? Will he take extraordinary steps to deal with this problem and to see what can be done to increase productivity?

Mr. Peart: As a former Minister the hon. Member will know that it was agreed that there should be a review at a certain date. We shall do that and honour the agreement; it is right that we should have a proper feed formula and a flexible system. Certainly we shall look at this and I always said that we would.

Mr. H. Hynd: In considering all these demands for higher prices for farmers, will my right hon. Friend bear in mind the interests of consumers?

Mr. Peart: Naturally I always bear those in mind; inevitably when considering an industry we have to bear in mind the production needed to meet demand, and we do this.

Devon (Minister's Visit)

Mr. Peter Mills: asked the Minister of Agriculture, Fisheries and Food what official proposals were made to him by the Devon farmers during his visit to the Devon County Agricultural Show; and what action he is taking upon them.

Mr. Peart: None, Sir. I visited the National Farmers' Union tent at the Devon County Agricultural Show quite informally, and had a short and pleasant chat with the county chairman and some of the members.

Mr. Mills: While I am not allowed to disagree with the Minister, may I ask a question, as I think he was wrong on that? Did it not really reveal the genuine fears and dismay of the farming community in the South-West, and, to say the least, is not the situation explosive? Before the next Price Review, will the right hon. Gentleman think very carefully before he and the Socialist Party make such promises again to the farming community?

Mr. Peart: As the hon. Member knows, my Price Review has been regarded as a very sensible and realistic review. As to my attendance at the Devon show, I have an impartial observer, John Winter of the Daily Mail who said:
Hostile 'Hello' Ends with a Round of Beer. Mr. Peart in the Lions' Den.


It was a friendly, informal meeting which I am sure was appreciated by the Devon farmers.

Mr. Thorpe: Does the Minister agree that, although Devon farmers are somewhat robust by tradition, they are politically very broad-minded? Would he not agree that perhaps one of the most serious indictments they have brought against the right hon. Gentleman is that his last Price Review appears to have inherited all the restrictionist tendencies of the previous Tory Administration?

Mr. Peart: I recognise that Devon farmers have a measure of political sophistication, but unfortunately they still return too many Conservative Members. However, I recognise that there are problems there. I hope very soon to be making a major announcement on long-term policy which I hope will benefit very much many small farmers all over the country, including Devon.

Mr. Prior: Does the Minister remember the promises made by himself and the Prime Minister when the Devonshire farmers came to London and met the Minister in a Committee Room upstairs? Does he not think that he cuts a pretty poor figure when he goes down among them?

Mr. Peart: Not at all. I remember not only the promises but my own statements. Our aim to have a long-term policy for the industry which is realistic and will make it more modern and efficient is a right one.

Farmers (Comprehensive Sample Survey)

Mr. English: asked the Minister of Agriculture, Fisheries and Food what is the number of farmers in the United Kingdom, and its various parts, respectively, according to such definition of the word farmer as he may consider appropriate.

Mr. Hoy: Of the 455,000 agricultural holdings in the United Kingdom in 1964, about 210,000 are believed to provide full-time work for one man or more, and of these, approximately 160,000 are in England and Wales, 26,000 in Scotland and 23,000 in Northern Ireland. These estimates are, however, open to a substantial margin of error since on many

holdings the amount of work provided cannot be assessed without inquiries on the spot. The Agricultural Departments are therefore proposing to undertake a comprehensive sample survey in the autumn of this year.

Mr. English: I thank my hon. Friend for that reply. Is he aware of a graph published by the National Farmers' Union which purports to show that the rise in farmers' incomes was exceeded over recent years by that of other incomes? Is he aware that the National Farmers' Union has never published the number of farmers upon which such graph is based or even said whether it is consistent over the period? Would my hon. Friend, after this survey, take steps to re-publish the graph on a consistent basis?

Mr. Hoy: I should not like to comment on all the graphs which are published in connection with agriculture, but I would give my hon. Friend the assurance that, when this survey is carried out, we will certainly take into consideration the request he has made.

Sir M. Redmayne: What will be the size of the sample? This sample will not be of great value unless it is fairly widespread and has regard to the particularities of various areas. I hope that the sample will be on a sufficiently wide scale.

Mr. Hoy: All this we have in mind. That is why I said in my Answer that it would be a comprehensive sample survey.

Marginal Farmers

Mr. Kitson: asked the Minister of Agriculture, Fisheries and Food what assistance he is now considering to help marginal farmers.

Mr. Peart: The Government's policy towards marginal farmers was given in the White Paper on this year's Annual Review. It is to tackle the fundamental problems of low income farmers by advice and assistance in improving their farm business, by voluntary improvement of farm structure, by special measures for the hills and uplands, and by improving agricultural co-operative and group activity.

Mr. Kitson: Has not the Minister said on several occasions recently that he


recognises the very special problems of marginal farmers? Although hill farmers at the last Price Review came out rather better than they did on some previous occasions, the position of the marginal farmer is even more difficult than it was before the last Price Review. Will the Minister have another look at this and see what can be done to help small farmers?

Mr. Peart: I am glad that the hon. Gentleman pays me the tribute of saying that my Price Review has helped hill farmers. I recognise that there is a problem here, not so much with what the hon. Gentleman terms marginal farmers. I think what the hon. Gentleman means is farmers who are on marginal land. The committees which I have set up to consider the long-term policy for agriculture affecting many of our small farmers in upland areas will take this into account.

Mr. George Y. Mackie: Is the Minister aware that one of the main trends in efficient farming today is simplification and that many marginal grants—I am talking about winter keep—stipulate that a farmer may produce only a certain amount of his gross income from, say, milk or fat cattle? Will the Minister ensure that restrictions of this type, for instance, on the upland dairy farmer and on the producer of fat cattle, are considered very seriously with a view to allowing these people to streamline their production?

Mr. Peart: The hon. Gentleman must be aware that we are trying to do this. Indeed, my hon. Friend the Joint Parliamentary Secretary reminds me of the announcement we have made in relation to the payment of a subsidy on a headage instead of on an acreage basis. We think that this was the right decision to make, certainly for England and Wales. The whole procedure of simplification is one that I am always studying. I agree with the hon. Gentleman that, if rationalisation can be achieved, so much the better. This is what my Department and the committees I have set up are examining.

Agricultural Mortgage Corporation (Interest Rates)

Mr. Eldon Griffiths: asked the Minister of Agriculture, Fisheries and

Food what estimate he has made of the additional cost to the farming industry of the increase to 7¾ per cent. in the interest rates charged by the Agricultural Mortgage Corporation.

Mr. Peart: The cost of the increase in the interest rate charged by the Agricultural Mortgage Corporation depends on the amount of new loans taken up by farmers at the increased rate and cannot be forecast.

Mr. Griffiths: Is the Minister aware that that reply, which adds very little to the sum of existing knowledge, is not particularly helpful? Is he aware, further, that the Government's policies have added some £30 million to the costs of the farming industry? Against this background, does he recognise that the great majority of farmers will have been delighted to read of the results of the voting in the House of Commons last night and cannot wait—[Interruption.]

Mr. Peart: I am certain that the worst thing the farming community would wish for would be the return of a Government who failed to provide a long-term policy for British agriculture. Hon. Members opposite, who also defend the National Farmers' Union, must know that in the main the criticism of the Union has been the trend of incomes under successive Conservative Administrations.

Mr. Emrys Hughes: Is my right hon. Friend aware that many farmers will also wonder where the money for Price Review prices would come from if all the Amendments to the Finance Bill were carried?

Mr. Scott-Hopkins: First, will the Minister put this to the test and recommend to the Prime Minister that he should go to the country? Secondly, will he answer the question asked by my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths)? Has he no estimate of what the increased costs are? Cannot he tell the House how much the Government's policies have cost the industry this year—a figure which cannot be recouped until after the next Price Review, which will be done by a Conservative Government?

Mr. Speaker: That part of the supplementary question concerned with whether the Prime Minister should go to the country was wholly out of order.

Mr. Wingfield Digby: Is it not evident that the rate of interest referred to in the Question will discourage capital expenditure in the industry, at the very time when capital expenditure in the public sector is rising so fast?

Mr. Peart: I cannot agree that there is any discouragement. I hope that hon. Members will not be so pessimistic about the future of this great industry.

Price Review (Hill Sheep Subsidy)

Mr. Stodart: asked the Minister of Agriculture, Fisheries and Food how much of the 1965 Price Review award of between £10 million and £11 million consisted of a hill sheep subsidy.

Mr. Jopling: asked the Minister of Agriculture, Fisheries and Food why the 1965 Price Review Award includes the increased subsidy awarded to hill sheep, when this has not been common practice previously.

Mr. Monro: asked the Minister of Agriculture, Fisheries and Food why the 1965 Price Review included the hill ewe subsidy for the first time.

Mr. Peart: The plus items in the award included about £2 million for the hill sheep subsidy. This figure was based on the difference between the average rate of subsidy over the past five years, 9s. 6d. per ewe, and the rate of 18s. determined at the 1965 Review.
Hitherto the question of whether subsidy was payable was decided each year after an assessment of the prosperity of hill sheep farmers in the preceding year. The rate fluctuated widely and in some years no subsidy was paid. At the 1965 Price Review it was decided to put the subsidy on a flat-rate basis. It will be paid each year, at a rate sufficient to cover the normal variations in weather conditions from year to year. Accordingly, like the hill cow subsidy, it has been included in the Price Review.

Mr. Stodart: Is not the Minister aware of the many occasions on which he has compared in the same sentence the £31 million Price Review award last year and the £10 million, or the so-called £10 million, award this year? If he is to talk on a strictly like-for-like basis, is not this a completely false comparison, in that

the £10 million is in fact only an £8 million award? Therefore, will he stop misleading the public into thinking that this is a slightly less miserable Price Review than it actually is?

Mr. Peart: I cannot accept that. I hope that the hon. Gentleman, instead of making wild accusations like that, will recognise that the change in the basis of the subsidy was agreed with the three unions.

Mr. Jopling: Is the Minister aware that on 17th March of this year, as appears from col. 1291 of HANSARD, he made a specific comparison between this Price Review and previous ones? Was not this wholly misleading the House and the farming community? Is not this something that he should withdraw and put properly on the record from now on?

Mr. Peart: I certainly will not. The hon. Gentleman, who obviously has contacts because of his past experience with the farmers' unions, should consult responsible farming opinion. Farmers believe that it was a right decision to change the basis of the subsidy. Now the farmer will know what he will be paid each year. The uncertainty which existed under the previous Administration has been removed.

Mr. Monro: The Minister is still misleading the House, because he is not in any way comparing like with like. The two Reviews were not comparable. The general public, the farmers and the House had the impression that he was comparing like with like.

Mr. Peart: I can only repeat—I am sorry that I have to repeat it so that hon. Members can learn the facts of the industry—that the simple fact is that the industry agrees with my change. It will give greater security. It will enable the farmer to know what he is getting. There was no attempt to mislead anyone in assessing the global total at the Review.

Mr. Shinwell: Is my right hon. Friend aware that, far from him misleading the House, the country, or the farming community, hon. Members opposite, who are demanding more and more subsidies, are bleeding the taxpayers? Can he say what would be the reduction in Income Tax if all these subsidies were abolished?

Mr. Peart: My right hon. Friend is quite right. We have to bear in mind the position of the consumer. It is rather strange that hon. Members opposite, who pretend that they are defending the farmer, are going against decisions which were agreed and approved by responsible farmers' leaders and the farmers' unions. I have already mentioned the attitude of the three unions concerned.

Mr. Scott-Hopkins: Is the right hon. Gentleman aware that whether or not the unions agreed is quite irrelevant to the question of comparing like with like? Is the right hon. Gentleman aware that in previous years the hill sheep subsidy has not been included in the annual Review out-turn, and that this year £2 million was included, thereby adding £2 million to the total out-turn of £10 million? The figure ought to be £8 million and not the £10 million which the Minister has in mind.

Mr. Peart: The hon. Member knows that the Review award is a net figure. These are plus items totalling £38½ million, including the milk, cattle and calf subsidies. There is no question of trying to mislead the House. Hon. Members opposite are always trying to stir up trouble when it is not there.

Imported Meat (Public Health Regulations)

Mr. Geoffrey Lloyd: asked the Minister of Agriculture, Fisheries and Food what measures are taken by his Department if bacteriological examination of samples of imported meat reveals a source of infection.

Mr. Peart: When such a finding is notified to my Department it is taken up with the responsible authority in the country of origin. Any history of such findings is borne in mind when a visit is made to a supplying country in connection with the arrangements under the Public Health (Imported Food) Regulations for the official health certification of meat and meat products exported to this country.

Mr. Lloyd: Will the right hon. Gentleman bear in mind that my Question is designed to focus public opinion in a responsible way upon the anxieties felt by scientists who are in close touch with

this problem? Is the right hon. Gentleman satisfied with a system by which, in effect, meat can reach shops and consumers before the results of the bacteriological tests made at the ports are made known?

Mr. Peart: I accept that one must have attention directed to this aspect and I am grateful to the right hon. Gentleman for doing so. I am considering the position to see if we can improve the situation by introducing new regulations. Consultations are taking place. However, I agree that this is very important and we try to take every precaution. In consultation with my right hon. Friend the Minister of Health I am having proposals examined by all the authorities concerned.

Mr. Geoffrey Lloyd: asked the Minister of Agriculture, Fisheries and Food if he is satisfied that health officers have adequate opportunity to examine cargoes of imported meat, especially of meat intended for human consumption; and if he will make a statement.

Mr. Peart: The Imported Food Regulations empower medical officers of health and their staffs to examine meat on importation and to sample it for special examination. My right hon. Friend the Minister of Health and I are consulting interested parties on proposals to revise the regulations to provide more specific powers for the detention of consignments while samples are examined.

Mr. Lloyd: In the same spirit as my previous questions, may I ask the right hon. Gentleman whether in the course of his consultations he will bear in mind that half of the food poisoning cases in this country are due to meat and that about half of the samples of frozen boneless horsemeat imported as pet food have been shown to be contaminated with salmonella organisms and that there is a risk of meat intended for human consumption being contaminated?

Mr. Peart: I accept that. The right hon. Gentleman is interested in this subject and I agree that it is a serious matter. Imported meat can be affected. That is why I have said that with my right hon. Friend the Minister of Health we are looking at the Regulations and discussing how best we can improve the situation.

Mr. Wallace: Can my right hon. Friend give a definite assurance that meat imported for pet food, including kangaroo meat, is rigorously confined to pet food preparation and does not enter channels leading to the preparation of food for human consumption?

Mr. Peart: I am anxious to see that all food which is imported, whether for pets or for human beings, is not infected or of bad quality.

Mr. R. W. Elliott: Is it not most difficult, particularly with canned meat, for the medical officer of health at the port concerned to make adequate inspection? Will the Minister recall the Aberdeen outbreak and the associated scare in Newcastle-upon-Tyne which might have been avoided had there been adequate inspection at the canning source by officials of his own Ministry? Does he think that his inspectorate is adequate?

Mr. Peart: I was not responsible at that period, but I assure the hon. Gentleman that since then we have strengthened our inspection overseas and more countries have been covered by our inspectorate service.

Agricultural Credit

Mr. Kenneth Lewis: asked the Minister of Agriculture, Fisheries and Food whether he will take steps to arrange a specially reduced interest rate for farm borrowing up to a limited amount, in view of the present high interest rate of borrowing from the Mortgage Corporation and the banks.

Mr. J. E. B. Hill: asked the Minister of Agriculture, Fisheries and Food whether he will set up an Agricultural Credit Organisation, backed by the Treasury, which will have special responsibilities for providing medium-term credit at reasonable rates of interest for those farmers who find it difficult to raise enough capital.

Mr. Peart: Agricultural credit is a very wide and complex question on which I am not yet ready to announce decisions.

Mr. Lewis: Is the right hon. Gentleman aware that there is a proposal by the Government that there shall be

special rates for certain categories of house purchase? If and when this is announced, will he see that farmers are treated not less favourably and fight for them a little harder than he has done in the Price Review?

Mr. Peart: Hon. Members will drag in the Price Review. No other industry has its income decided in this way, and I think that the Review is a good procedure. On the question of agricultural credit, there are many problems to be settled and I am carefully looking at this matter.

Mr. Hill: Has not the Minister previously studied this problem? Otherwise, how could a specific pledge in terms of Question No. 20 have been included in the Labour Party's election statement? Surely there was some previous reconnaissance of the problem? In any event, since the election has not the farmers' need for raising extra capital and their difficulty in doing so been aggravated, among other things, by the prospective new burdens to be laid upon the industry by the Finance Bill, should it become law?

Mr. Peart: The hon. Member is quite right to draw my attention to a statement of policy which was made not long ago by my hon. Friends. I accept that. I also look back to another policy statement. I have here the Agricultural Charter of the Conservative Party of 1948. [Interruption.] The hon. Member asked me whether I had looked back. In 1948 hon. Members opposite promised that steps would be taken on these lines and they did nothing about it when they were in power.

Mr. Rankin: On a point of order. When hon. Members opposite intervene in these Questions, ought they not in fairness to the House to reveal their self-interests in the Questions that they ask?

Mr. Speaker: Hon. Members are not under an obligation to reveal their interests in Questions.

Sir H. Butcher: Could the right hon. Gentleman indicate why in 1965 the rates charged by the Agricultural Mortgage Corporation should be a full 1 per cent. more than the rates charged by building societies to urban owner-occupiers?

Mr. Peart: I accept that. As I have said, and I repeat, this is a very difficult question—whether a special industry should be singled out. There are problems here. I recognise this, and I am carefully examining them.

Mr. George Y. Mackie: Is the right hon. Gentleman aware that agriculture is now probably the most capital-intensive industry in the country? Are these problems political and economic or are they technical problems?

Mr. Peart: There are technical problems and there is the wider political problem whether a special industry should be singled out. In my Price Review and in the White Paper I have announced some new arrangements which will help in providing medium-term credit for those farmers who find it difficult to raise enough capital, and there is now Treasury backing. We are actually providing up to £200,000 a year by way of guarantees against bad debts. This should support many million pounds of new lending.

Wise Committee (Report)

Mr. Ridsdale: asked the Minister of Agriculture, Fisheries and Food when he now estimates he will receive the report of the Wise Committee.

Mr. Peart: As the hon. Member knows, I am looking forward to receiving an interim report before the end of the year.

Mr. Ridsdale: Cannot the right hon. Gentleman publish even an interim report on this interim report so that he can deal with such vital problems as loans and amalgamations of county council smallholdings? Does not the Minister realise how hard the county council smallholdings have been hit by this Government since October?

Mr. Peart: I am anxious that this shall be a full report. The rôle of smallholdings is very important. There are many arguments here, and I should like to see a full report and study it carefully. That is why I do not wish to rush the Committee.

Sir D. Renton: Will the Minister think again about this matter? We have waited a long time for this report. Its findings are urgently required so that

smallholding committees can formulate their policy afresh. It is not good enough to have to wait till the end of the year before we even get an interim report.

Mr. Peart: I hope the right hon. and learned Gentleman will realise that this is the first major review of smallholding policy since 1947 and it will benefit no one to hurry the Committee into reporting before it has given the subject all the consideration it deserves. I hope that hon. Members will be sensible and realistic.

Mr. Ridsdale: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment.

Bull Licensing

Mr. Jopling: asked the Minister of Agriculture, Fisheries and Food what advice his advisers on population genetics have given him with regard to the continuance of the bull licensing scheme.

Mr. Hoy: From the advice he has received, my right hon. Friend is satisfied that it would be unwise to discontinue bull licensing until the selection of breeding stock by reference to records of performance is generally adopted in the livestock industry. Powers were taken in 1963 to refuse licences to bulls—and boars—which fail to conform to prescribed standards of suitability for breeding, and from 1st January, 1966, no bulls of the pure dairy breeds will be licensed in England and Wales without adequate ancestor performance records for lactation and butterfat.

Mr. Jopling: Is the Joint Parliamentary Secretary aware that population genetics should be the most important consideration of all when dealing with animal breeding? Is he aware that of the two organisations which he says give him most advice on population genetics the senior member of one has been highly critical of the bull licensing scheme? Secondly, is he aware that a member of the other, the director of the Animal Breeding Research Association, says that all bull licensing is make-believe and that its contribution to genetics is negligible? [HON. MEMBERS: "Speech."] Will the hon. Gentleman stop taking out-dated advice?

Mr. Hoy: I hope that in my original Answer I made clear that these recommendations deal with both bulls and boars, and that the population geneticists advise the Ministry. The Minister has to take all their advice into consideration. I cannot be asked to comment on the opinions of other people expressed in magazines and elsewhere.

Mr. Buchanan-Smith: In view of the fact that the two organisations from which the Minister takes advice in these matters are both situated north of the Border, may I ask the hon. Gentleman whether he will take account of the opinion of progressive Scottish farmers that both the bull and boar licensing systems need urgent review?

Mr. Hoy: That may well be so, and the fact that these opinions come from north of the Border perhaps carries a little more weight with me.

Race Horses

Mr. Harold Walker: asked the Minister of Agriculture, Fisheries and Food why race horses entering Great Britain are treated for quarantine purposes differently from dogs and other animals.

Mr. Hoy: Dogs and cats are quarantined because of the danger of introducing rabies, and ruminants because of foot-and-mouth disease. Race horses are extremely unlikely to introduce either of these diseases.

Tenant Farmers (Rents)

Mr. William Hamilton: asked the Minister of Agriculture, Fisheries and Food if he will initiate an inquiry into the reasons for the rising rents which are being demanded of tenant farmers.

Mr. Peart: I see no reason for special inquiry in view of the arbitration machinery available for disputes between agricultural landlord and tenant.

Mr. Hamilton: Does my hon. Friend realise that there have been quite outrageous increases in rents for tenant farmers whom we on this side of the House are very anxious to protect from the rapacious landowners? Can he produce any figures comparable to those produced in Scotland which show, for

instance, that rents in the last three years have been quadrupled in some cases? If he can, will he advise my right hon. Friend the First Secretary to refer this matter to the National Board for Prices and Incomes? Unless and until tenant farmers get help in this respect from the landlords the taxpayer should not be asked to subsidise the landowner.

Mr. Peart: I accept that my hon. Friend is anxious to protect tenant farmers against abuses. Figures affecting Scotland, in particular, are obviously a matter for my right hon. Friend the Secretary of State for Scotland. As to the future in relation to arbitration machinery, I shall be considering the rent provisions of the Agriculture Act, 1958, and the Agricultural Holdings Act, 1948, as part of my general review of agricultural landlord-tenant legislation. I know that the previous Administration did things in the 1958 Act which we quite rightly condemned.

Mr. Peter Mills: Will the right hon. Gentleman bear in mind that there is another side to this coin? Is he aware that four or five years ago, particularly in the South-West, rents were so low that landlords could not carry out the improvements which the tenants demanded?

Hon. Members: Answer.

Cattle (Export)

Mr. Harold Walker: asked the Minister of Agriculture, Fisheries and Food if he will take steps to control the export of subsidised British beef cattle.

Mr. Stodart: asked the Minister of Agriculture, Fisheries and Food how many clean cattle were exported to the European mainland between 1st January and 31st March this year, and from 1st April to the latest available date; and what were the figures for the corresponding periods last year.

Mr. Peart: In the first quarter of this year just over 8,100 head of clean cattle were exported to the Continent compared with about 7,000 head over the same period last year. In April and May this year, the last month for which firm figures are available, a total of 26,500 head were exported compared with 12,500 head in the same two months of 1964.
But I estimate that there has been a downward trend in exports in June and I expect this to continue as more grass-fed cattle come forward on the Continent. I can assure the House, however, that the situation will continue to be kept under the closest review.

Mr. Walker: Is my right hon. Friend aware that his figures contrast sharply with those issued recently by the National Federation of Meat Traders, which pointed out that last year 300,000 live cattle were exported to the Continent and estimated that this rate would be doubled this year? Is he aware that these are cattle produced with the assistance of subsidies paid by the British taxpayer and that there is great and growing concern about the increasing shortage of meat turning into a famine, as forecast by the National Federation of Meat Traders? Is he aware that in the first five months of this year there has been a 13 per cent. decline in home consumption of beef and veal? Will he give careful consideration to giving the British taxpayer a due return on his money?

Mr. Peart: My hon. Friend is right to stress this. It is an important matter. I have always said that I would carefully look at this and that if action was necessary I would act. I am not responsible for the figures mentioned by other people outside the House. As I have said, the figures which I have given were carefully checked. As for the future, I believe that there will be a decline. There is also another factor which should be borne in mind. Only clean cattle—normally the minority of exports—are eligible for the price guarantee and the majority of these cattle which are now being sent abroad have no guarantee attached to them. This is a difficult matter which we are carefully studying. It has to be borne in mind that if one interferes at one point one may disturb international trade.

Mr. Stodart: Can the right hon. Gentleman put the matter in perspective and tell us what percentage of all the clean cattle certified in the last few months had been exported? Is he aware that it would reassure the House to know whether any subsidy has been paid on those clean cattle?

Mr. Peart: As I have said, I do not now have all the figures but I will send

them to the hon. Member. I have the month-by-month figures for clean and other cattle, but I do not have the percentage figures. I will send those to the hon. Gentleman. The figures I have confirm what I have said.

Mr. Chichester-Clark: How much of this increase can be attributed to export rebate and what effect, if any, has this had on the Northern Ireland meat trade?

Mr. Peart: None at all. The hon. Member must well know that there is a strong world demand for beef because of world factors which are known to everybody in the trade.

Mr. George Y. Mackie: Is the right hon. Gentleman aware that the export of quality cattle and sheep at high prices to the Continent should be of great value not only to the agricultural industry in Scotland but also to the taxpayer?

Mr. Peart: I accept that. This is one of the factors which we have to consider and I said this at the Royal Agricultural Show the other day. The emphasis there is on exports. We should like to export quality products to all parts of the world but we must balance home demand with demand elsewhere.

Swine Fever

Sir M. Redmayne: asked the Minister of Agriculture, Fisheries and Food what have been the number of outbreaks of swine fever and the cost of compensation in each of the financial years since the beginning of the eradication policy; and whether he will make a statement on the latest progress in this campaign.

Mr. Peart: The answer to the first part of the Question involves a considerable number of figures, and I will, therefore, with permission, circulate in the OFFICIAL REPORT a statement giving the details. This will show a marked decline in the incidence of swine fever since the introduction of the eradication policy in March, 1963. The success achieved to date is very encouraging, and I am confident that, with the continued co-operation of farmers and traders, the aim of eradication can be achieved. But I cannot emphasise too strongly that everyone owning or attending pigs should report at once any suspicion of swine fever, and that they should not send any ailing or unthrifty pigs to market.

Following is the information:


SWINE FEVER


Incidence of Disease and Compensation paid since introduction of Eradication Policy on 11.3.63


Period

Number of Outbreaks
Compensation Paid for Pigs Slaughtered



£


11.3.63–31.3.63
…
331*
324,720


1.4.63–31.3.64
…
973†
3,630,994


1.4.64–31.3.65
…
309
1,280,820‡


1.4.65–30.6.65
…
35
226,315‡


* Includes 167 outbreaks confirmed before 11.3.63 in which the herds were still under restrictions at that date.


† Includes 2 outbreaks confirmed before 11.3.63 in which the herds were still under restrictions at that date.


‡ Provisional figures.

Sir M. Redmayne: asked the Minister of Agriculture, Fisheries and Food on how many farm premises there has been more than one outbreak of swine fever involving slaughter and the payment of compensation; and what is the shortest interval between two outbreaks on the same premises, where slaughter and compensation has been or may be authorised.

Mr. Peart: There have been 78 instances of disease occurring more than once on the same premises out of 1,648 cases of swine fever involving slaughter and compensation.
The shortest interval of time between two successive outbreaks was 26 days.

Sir M. Redmayne: Seventy-eight out of well over 1,000 seems a fairly reassuring figure, but is the Minister satisfied that the somewhat disturbing stories one hears from time to time about dishonest practices which might arise out of this compensation scheme are not well founded and that the matter is adequately watched?

Mr. Peart: Our veterinary people watch this carefully. Restocking is not permitted until 14 days after completion of disinfection. In addition, our own experimental work has shown that, even without disinfection, the swine fever virus does not usually survive for more than about 10 days.

Mr. J. E. B. Hill: I appreciate the need to press on with this policy and take full precautions, but does the Minister realise that the closing of markets for even one case in the locality inflicts great

hardship on the market operators, because their business is cut right off, and on those farmers who rely on getting rid of weaners and so on? If this policy is to go on a long time, will the right hon. Gentleman consider the possibility of giving help and, perhaps, compensation to those who suffer directly from the campaign?

Mr. Peart: Hon. Members must be very careful here. I am continually pressed to do something about swine fever and the need to take precautions is urged upon me. Although hardship may be created, it would be very foolish to allow a policy to operate which would mean relaxation. It is a serious disease which causes great losses to the farming community. If some hardship is caused by the closing down of market activities for a short period, hon. Members must, I think, accept that this is right.

Labelling of Food (Committee's Report)

Mr. Longden: asked the Minister of Agriculture, Fisheries and Food whether he has now considered the representations submitted by the various interests concerned in respect of the 72 recommendations made in the Report of the Food Standards Committee, published in September, 1964, reviewing the provisions of the Labelling of Food Order, 1953; and if he will make a statement.

Mr. Hoy: We are still dealing with the very large number of representations made on the Committee's Report and having discussions with the interested organisations as a preliminary to formulating proposals for new labelling regulations.

Mr. Longden: Cannot the Government expedite this matter? We have been waiting an inordinate time. The Committee was originally set up in 1947, and the consumer is still waiting for the protection which descriptive labelling could give him. Cannot the matter be expedited?

Mr. Hoy: I cannot accept responsibility for all the intervening years. The Report was not published until the end of September, 1964. The hon. Gentleman will be aware that we have then to give the parties concerned six months to consider what is to happen. When we


receive representations, we have then to consider them, and, even after proposals are made, we have to issue these to the parties concerned before legislation can be introduced.

Brucellosis

Mr. Kitson: asked the Minister of Agriculture, Fisheries and Food when he intends to introduce a scheme to eradicate brucellosis; and if he will make a statement.

Mr. Peart: I regret that I cannot yet add to my reply to the hon. Member's Question of 19th May.

Mr. Kitson: It was 12 months ago last week when the right hon. Gentleman called upon the then Government to introduce a brucellosis eradication scheme. Does he realise that, as every year passes, there are several people who suffer from undulant fever and never recover from it? Will he explain to the Chancellor of the Exchequer that it is not right to economise in this way and delay the introduction of an eradication scheme? Will he please get on with it?

Mr. Peart: I am glad that the hon. Gentleman has raised this matter, and I accept that I urged previous Administrations to take action. I regard it as important. I made a statement about it in reply to one of his hon. Friends in the Welsh Grand Committee a week or two ago. The hon. Gentleman will appreciate that there are difficulties here. For instance, if we have an eradication scheme for brucellosis, it will involve a slaughter policy which would cost between £40 million and £50 million. I have to make a final decision on whether to do that immediately or whether to have a gradual approach. I am watching this very carefully. It involves questions of policy affecting the supply of staff and also the amount of money which would have to be used. I hope that the hon. Gentleman will be sensible.

Mr. Gibson-Watt: The statement which the right hon. Gentleman made to me in the Welsh Grand Committee the other week was entirely empty and negative and he did not go any further from his previous position. Will he accept that this is an important problem and ask his officials and veterinary officers to consider

whether a start could be made with a new eradication scheme, starting it in Wales as was done with tuberculosis?

Mr. Peart: I am considering whether we should make a start in a small area with a pilot scheme of the kind mentioned, but before making that final decision one has to be quite sure about the estimates of how much it will cost the community. My reply to the hon. Gentleman in the Welsh Grand Committee was not an empty one indicating a negative approach. I gave him—courteously, I thought—the figure of £40 million which would be the cost of a slaughter policy.

Strawberries (Import from Republic of Ireland)

Mr. Derek Page: asked the Minister of Agriculture, Fisheries and Food what is the price of Irish strawberries offered for export to Britain; and what volume of imports he expects from Ireland.

Mr. Hoy: Fresh strawberries imported from the Irish Republic are normally sold on commission. I have no reason to think that the volume of such imports this season will greatly exceed last year's figure, which was nine tons.

Mr. Page: Does my hon. Friend agree that the figures he has given would not give any reason for the depression of British prices, but, on the other hand, will he bear in mind that we are well capable of growing all we need?

Mr. Hoy: Indeed we are, but my hon. Friend will remember that in none of the last four years have imports of fresh strawberries been more than about 20 tons. About 640 tons of pulp, on average, are imported annually. Our own production is roughly 30,000 tons, half going for fresh consumption and the remainder for jam. We are well able to deal with this, and it does not provide a reason for prohibiting this import from another source.

Sir H. Legge-Bourke: The Minister says that we can grow all the strawberries we want. Will he bear in mind that imports of pulp from the Iron Curtain countries have a severe effect on the market?

Mr. Hoy: All I was saying was that total imports are not all that great in comparison with our own production, and


they have not had the effect that the hon. and gallant Gentleman suggests. I have not received any representations from the interests concerned.

Mr. Rankin: Will my hon. Friend assure us that we are able to grow all the strawberries we can pay for?

Sir Knox Cunningham: Is the hon. Gentleman aware that some very excellent strawberries are grown in my constituency of South Antrim, but they are so good that, generally, they are all consumed in Ulster?

Mr. Hoy: It is a matter for regret that they are retained there. I should be happy to sample them personally.

Sir Knox Cunningham: I shall send some over to the hon. Gentleman.

Carrots (Imports from the United States)

Mr. Norwood: asked the Minister of Agriculture, Fisheries and Food if he is aware that imported United States carrots in packages retail at about 1s. 4d. per lb., and that the British carrot producer receives about 1d. per lb.; and why imparts of United States carrots into this country are permitted.

Mr. Hoy: The very small quantities of carrots imported from the United States command relatively high prices because they are generally of a type not available from home-grown sources at the time they arrive. I know of no grounds on which such imports should be prohibited.

Mr. Norwood: Does the Minister agree that the only distinction between United States carrots and those grown here is basically one of size? Would he further bear in mind that many producers of carrots in this country find great difficulty in disposing of their crop even at ruling prices? Would he, therefore, look at all imports of carrots with the greatest strictness?

Mr. Hoy: Yes, indeed. May I remind my hon. Friend and the House that these carrots imported from America sell at a much higher price than do our home-produced carrots. The total imports for 1964 from America were about 3,400 tons and from all sources they amounted to about 26,500 tons, whereas our own home

production reached between 300,000 and half-a-million tons per annum.

Mr. Eldon Griffiths: Is it not a fact that during the period when British carrots are coming on to the market there is considerable protection against imported carrots whether from America or anywhere else? Does not the hon. Gentleman agree that, unfortunately, one of the reasons why British carrots fail to compete is that they are not always as well packed as those which are imported from California?

Mr. Hoy: Packaging has a considerable amount to do with sales. It is true that there is an import duty of £1 per cwt. in May and June, and throughout the rest of the year there is a 10 per cent. ad valorem duty.

R.A.F. AIRCRAFT (ACCIDENT, THE BALDONS)

Mr. Hay: (by Private Notice) asked the Secretary of State for Defence whether he will make a statement about the accident to a Hastings aircraft of the Royal Air Force at The Baldons, Oxfordshire, on 6th July, in which over 40 Service men were killed.

The Secretary of State for Defence (Mr. Denis Healey): Shortly after four o'clock yesterday afternoon, a Hastings from the R.A.F. Station, Abingdon, crashed near Dorchester, about three miles from the airfield. The aircraft, which carried Army and Royal Air Force passengers, some of whom were to undertake practice parachute jumps, had taken off a few minutes before. The captain had reported control difficulties and the aircraft was returning to the airfield.
All six Royal Air Force members of the crew and the 35 passengers of the Army and Royal Air Force lost their lives. Two were members of the Territorial Army undergoing training.
A board of inquiry has been convened and assembled this morning.
I know that the House will join with me in expressing our deep sympathy with the bereaved.

Hon. Members: Hear, hear.

Mr. Hay: Is the right hon. Gentleman aware that my right hon. and hon. Friends


and myself wish to be associated with his expression of sympathy to the relatives of those who lost their lives in what I read is the worst accident which has ever befallen the Royal Air Force?
The right hon. Gentleman said that a board of inquiry has been convened. Since the Hastings aircraft is in very general service and cannot be said to be a fighting aircraft, will he consider, in this case, waiving the customary rule that the proceedings of such boards of inquiry for Service aircraft are in private and on this occasion, bearing in mind the very great loss of life and the natural anxiety which everyone has to find out the causes of the accident, holding the inquiry in public?

Mr. Healey: I am grateful to the hon. Member for his early remarks.
I have considered the question of the inquiry carefully, but there are juridical obstacles about holding a board of inquiry in public, as I think he will remember. In view of the very deep public concern about this matter, I undertake to the House that I will make the fullest possible statement about the findings of the inquiry as soon as I possibly can.

Mr. Shinwell: May I, on behalf of the back-bench Members on this side of the House, associate myself with the expression of sympathy to the relatives of those who lost their lives? May I ask my right hon. Friend to convey to the officers and men of the Royal Air Force our respectful sympathy?

Mr. Healey: I am grateful to my right hon. Friend and I will certainly do as he suggests.

Mr. Neave: As the paratroop training instructors who were killed were my constituents, would the Minister not like to record now the fine performance of the paratroop training school at Abingdon, in spite of this terrible disaster, and his hope that it will continue its great work in training?
In response to the question of my hon. Friend the Member for Henley (Mr. Hay), will he say that he will give a full report to the House when the time comes?

Mr. Healey: Yes, Sir. I will certainly do both of those things.

Mr. Crawshaw: I appreciate this opportunity of adding a few words of humble tribute to those which have been expressed. I hope that the House will allow me to pay a special tribute to the members of the Territorial Army who lost their lives. These men not only give unstintingly of their services to the country, but they are prepared at such times to make the final sacrifice. Not only the House but the whole country is concerned about the future of the Territorial Army. I know that whatever the decision may be, the House would like to go on record the great appreciation which we owe to these people.

Mr. Soames: We are grateful to the right hon. Gentleman for his assurance that he will make as full a statement as possible to the House. In the meanwhile, will he confirm that the accident, on the face of it, and before the inquiry, seems almost inexplicable, since the Hastings has an excellent low-accident rate up to the present?

Mr. Healey: Yes. I think that it is worth saying that over the last five years the Hastings has a fatal accident rate only half as high as that of most aircraft in the R.A.F. In the last four years it has suffered no major accident.

Mr. Lubbock: May I, on behalf of my right hon. and hon. Friends, associate myself with the expressions of sympathy to the relatives of those who died in this tragedy? Is the Secretary of State satisfied that pending the results of the inquiry the Hastings should be allowed to continue flying, irrespective of the fact that, as he said, it has a very low accident record, for it has been in service for a considerable time?

Mr. Healey: Yes, Sir. I have considered the matter. In view of the fact that the pilot reported control difficulties shortly before the crash took place, I have instructed that all other Hastings should be examined and should have their control systems checked before they carry out further flights.

ESTATE AGENTS

3.39 p.m.

Mr. R. E. Winterbottom: I beg to move,
That leave be given to introduce a Bill to make provision with respect to persons and local authorities who negotiate for or otherwise act in relation to the acquisition or disposal by others of estates, interests, or rights in or over land; and for purposes connected therewith.
The purpose of the Bill I seek leave to introduce is described on the Order Paper. I hope that hon. Members can hear me. A considerable exodus is taking place.

Mr. Speaker: Order. Hon. Members should remember that they may need a parallel indulgence themselves one day.

Mr. Winterbottom: The reason for the Bill can be found in the columns of the Sheffield Telegraph over the past few months. The paper has been running a campaign against the get-rich-quick merchants who have been masquerading as estate agents. In Sheffield, during the past six months, people have lost thousands of pounds in lost deposits to these bogus operators.
The Sheffield Telegraph, true, I believe, to the best traditions of the British Press, without fear and without favour, has exposed these tricksters, and I want, first, to pay my tribute to the paper and to say that the cases it has mentioned have promoted the whole of my arguments this afternoon.
According to the letters I have received, since it became known that I would seek leave to introduce the Bill, I gather that the Sheffield experience is repeated in almost every other part of the country. Some of these merchants, these tricksters, gain thousands of pounds from people who pay them deposits on houses which they can never get. If any hon. Members doubt whether or not the time has come when such a Bill should be introduced into this House all they have to do is to read the accounts of the actual cases in the Sheffield paper when I feel that they would be convinced, with me, of the justice of such a Measure as I have the honour to ask leave to introduce this afternoon.
There are several ideas in the proposed Bill on which I wish to comment. First, I want to express my gratitude to the

hon. Member for the Isle of Ely (Sir H. Legge-Bourke) who, in 1962, introduced a Bill for the registration of estate agents. I want to thank him for permission to use almost the whole of the contents of that Bill. But with respect to him I want to say that that Bill did not go far enough, because it really ensured professional monopoly and business security for those who are in the professional organisations of estate agents.
The hon. Gentleman's Bill has been extended so that estate agents of experience who are conducting their business with honour and with credit over the years but who are not part and parcel of any professional organisation could be brought within the fold of registration and have provision made for them in the national council which it is proposed to set up.
I have made provision—and this is controversial—for the right of municipalities and local authorities to act as estate agents and to carry out all those functions in competition with the existing agents who will be registered. Moreover, municipalities will have some control over those estate agents and in the central offices of those authorities there will be lists of all the properties which are for sale, for the guidance, knowledge and help of any people who seek their assistance.
The Bill would provide for a national council and for that council to set up a finance committee, a disciplinary committee, and a committee to regulate an indemnity fund—long overdue in this country. The indemnity fund would be contributed to by the estate agents who would be registered under the terms of the Bill. That fund is one of the principal provisions in the proposed Bill, because even if we have registration and the recognition of estate agents by means of legislation we still have no guarantee of their honesty. So there has to be a fund to cover even the registered estate agent who may default on his obligations to the general public.
All I have said will readily be agreed to by estate agents, with perhaps the single exception of the proposed provision for local authorities to act as estate agents.
There is another controversial proposal in the Bill, and that is to institute a legal maximum commission above


which estate agents would not be allowed to charge. That amount of commission is put at 2½ per cent., to include all expenses, including advertising. Moreover, there is a provision that an estate agent would be able to charge either the vendor or the purchaser only and not both. It is common practice to charge both the vendor and the purchaser for the same services in dealing with one unit of property. I believe that the time has come, even among solicitors, when that practice should be discontinued by law.
I have a letter here from a well-known, very honourable, very distinguished estate agent, who has built up a first-class business over the years. He charges 2 per cent., including all his expenses, for any transaction involving a sum less than £1,000, and there are reductions of that 2 per cent. for a transaction over £1,000 and he charges 1½ per cent. with corresponding reductions to old-age pensioners and widows. That man, who has built up an honourable business, is, I feel, the type of man who ought to succeed in that type of business.
I have great pleasure in asking the leave of the House to introduce the Bill. The gravity of the situation throughout the country has provided the earnest of my intentions. This is a nettle which is stinging the general public. It is a nettle which should be grasped, and it can only be grasped by legislation by Parliament.

3.48 p.m.

Mr. Paul Hawkins: I should, as a chartered surveyor and a chartered auctioneer, declare an interest in the Bill. I wholly agree with the majority of the provisions which the hon. Gentleman the Member for Sheffield, Brightside (Mr. Winterbottom) has outlined, in so far as they are the same as those which were in the Bill of my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke). I was very sorry to see that that Bill was not passed last Session.
As I say, I agree with the majority of the provisions, but till one sees the proposals in the Bill it is very difficult to tell whether one can agree or not with some of the others. For instance, the provision for municipalities acting as estate agents,

once all the estate agents are registered, seems to be an unnecessary burden on the rates. In view of the very great shortage of trained and skilled valuers, and people who can truly assess the value and the structural conditions of houses, I think that this staffing of municipality offices would be extremely difficult.
As to the commission, I would say that in the suburbs of many big towns this is a most cut-throat business and I would think that many charges are less than 2 per cent. I act in country districts where we sell not many houses, but I have never heard there of charging both the vendor and the purchaser commission. That is a very bad practice, and it is one which I certainly have never heard of in my district.
I would only say that if the Bill—if it is introduced—is modified the hon. Member will gain the support of the vast majority of the professional organisations and the vast majority—

Mr. Speaker: Order. At that point, then, I must ask the hon. Member if he is opposing the Motion.

Mr. Hawkins: I am opposed to the Bill, Sir, because of the proposed setting up of municipal authorities as estate agents.
If one is selling houses on the outskirts of a big town where one may be dealing with 100 houses built at about the same time and to the same specification, it is hardly necessary to inspect them all, but when one is working in the country, and dealing with old rectories, old halls, and cottages, one has to examine them very carefully indeed.
I repeat that I am opposed to the Bill because of the proposal to set up estate agent offices in council offices.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of Public Business), and agreed to.
Bill ordered to be brought in by Mr. Winterbottom, Mr. George Craddock, Mr. David Griffiths, Mr. Gregory, Mr. Lipton, Mr. Frank Allaun, Mr. William Hamilton, Mr. Owen, Mr. Varley, Mr. Harold Walker, and Mr. Thorpe.

ESTATE AGENTS

Bill to make provision with respect to persons and local authorities who negotiate for or otherwise act in relation to the acquisition or disposal by others of estates, interests, or rights in or over land; and for purposes connected therewith, presented accordingly and read the First time; to be read a Second time upon Friday, 16th July, and to be printed. [Bill 184.]

"except that, in the case of licences taken out after the said 6th April and before 1st September 1965, for the reference in subsection (1) of this section to Parts II and III of that Schedule there shall be substituted a reference to those Parts as modified by Part VI of that Schedule.


5
(6) The holder of a licence current on 1st September 1965 on which duty was chargeable under the said Part II or III modified as aforesaid who makes application before the expiration of twelve months beginning with that date to the council with which the vehicle is for the time being registered shall be entitled to a refund of duty, in respect of any period after the end of August 1965 during which the licence has been or (on the assumption that it is not surrendered) will have been current, of an amount equal to one-twelfth for each complete month in the said period of the difference between—


10



(a) the annual rate of duty chargeable in respect of that vehicle under the said Part II or III modified as aforesaid, and


15
(b) the annual rate of duty appropriate to that vehicle under the said Part II or III without such modification.


20
(7) On the surrender after the end of August 1965 of any such licence as is mentioned in subsection (6) of this section, the rebate of duty payable under section 9 of the said Act of 1962 shall be computed as if the rate of duty on the licence had been the appropriate rate specified in the said Part II or III without such modification as is mentioned in that subsection.

Mr. Speaker, would it be convenient for the House to discuss this Amendment with the other ones dealing with the revisions of vehicle excise duty, namely, Amendments Nos. 2 to 6 inclusive, No. 9, and No. 117?

Mr. Speaker: Yes, if the House so pleases, and may I say that we ought to discuss with this Amendment the proposed Amendment in the name of the right hon. Member for Rushcliffe (Sir M. Redmayne), in line 9, leave out "end of August" and insert "6th April". I shall call that Amendment for a Division if required.

Mr. Edward Heath: That is quite agreeable to us, Mr. Speaker.

Mr. MacDermot: I am obliged to you, Mr. Speaker, and to the right hon. Member for Bexley (Mr. Heath).
This group of Amendments has been tabled to honour the undertaking which we gave during our debates in Committee to look again at the proposed increases in vehicle excise duty as they affected

Orders of the Day — FINANCE (No. 2) BILL

As amended, further considered.

Clause 5.—(VEHICLES EXCISE DUTY: INCREASES AND ALTERATIONS.)

3.53 p.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): I beg to move Amendment No. 1 in page 4, line 19, at the end to add:

showmen's vehicles and farmers' goods vehicles.

I can deal with the position of showmen's vehicles quite briefly. It was put to us by hon. Gentlemen opposite that the increase for showmen's vehicles should be reduced from a 50 per cent. increase to a 25 per cent. one. I indicated at the time that we were sympathetic to this, but I wanted to have inquiries made to check the figures put forward by the Guild of Showmen, on which the proposal was based. That has been done, and I am satisfied that the case is made out. These are vehicles which have very little road use indeed, and it would, I think, impose a quite unfair burden on them if we were to keep a full 50 per cent. increase. Quite simply, what the Amendments do is to make the increase one of 25 per cent. instead of 50 per cent.

The position with regard to farmers' goods vehicles is a little more involved. I promised to consider further especially the case of the small farmer with the


relatively small vehicle which may be used a good deal on the farm, but also has a certain road use, but which is quite different in its use from regular hauliers' vehicles, or, indeed, from certain larger haulage vehicles used by farmers mainly for road use.

I offered to discuss the matter further and receive any further representations from the interested organisations, and, as I said yesterday, I had a most helpful discussion with a deputation from the N.F.U. They stressed particularly their concern with the dual purpose vehicle, nearly all of which are under 30 cwt.—the Land Rover type of vehicle—and, in particular, when these vehicles are being used on a road to tow a trailer. Hon. Members will remember that the effect of the provision in the Bill was to make a very substantial increase for these vehicles.

What we are proposing in the Amendments is a new scale of rates, first, for farmers' goods vehicles. That is quite generally covering the whole field of farmers' goods vehicles, including the dual purpose ones. We are proposing an increase rising on a graduated scale from a 25 per cent. increase at the bottom, to a 50 per cent. increase at about the 4-ton mark. Any figure that one chooses is in a sense arbitrary, but that is the figure which we have chosen as indicating the difference between the smaller type of vehicle which I undertook to try to help, and the larger one.

I would remind the House that a farmer already has a considerable concession compared with other road users. For example, for a 4-tonner he will pay £32 duty compared with the £90 paid by a general haulier. The cost of reducing the rate of increase for these vehicles will be about £200,000 out of an increase of £500,000 which would have been caused by the proposals as they stand in the Bill, so the effect of the concession is to reduce the increase on the whole farming community from £500,000 to £300,000.

The second thing that we propose is a reduction in the increases in the extra trailer duty for small goods vehicles. This will include the dual purpose vehicles. The benefit of this concession applies not only to farmers, but to a much wider range of small businesses, including the

builder, the decorator, the plumber, the sweep, and some retailers such as greengrocers who, on occasion, use a trailer hitched behind a van or other small goods vehicles.

Perhaps I could give one or two examples to show the extent of the benefits provided by the Amendments. Let us consider, first, the Land Rover type of vehicle without a trailer. A 25-cwt. vehicle before the Budget paid £15 duty. Under the Budget proposals it would have paid £21 10s. Under the Amendments it will pay £18. With a 30-cwt. vehicle the equivalent figures are £15, £22 5s., and now £19. I think that the House will agree that this modest increase compares favourably with the private car increase from £15 to £17 10s.

Let us consider next the same vehicles which are being used with trailers. Before the Budget the 25-cwt. vehicle would have paid £26 5s. The increase which was so much objected to under the Budget would have been to £39 10s. Under the Amendment it will be £30. The equivalent figures for a 30-cwt. vehicle are £26 15s., £40 5s. and £31. The maximum cost of this concession on trailer duties has been estimated at £150,000 a year. It can only be a general estimate, of which it is thought about £100,000 will be for farmers' vehicles, and this will accrue to the benefit of the farming community. As a result of the Amendment farmers will benefit by a reduction of about £300,000 in the increases which have been imposed.

4.0 p.m.

There remains the question of the operative date. If it were practicable we would have liked to make this concession operate retrospectively, back to the date of the Budget, because under the Provisional Collection of Taxes Act the new duties imposed by the Bill are already being collected at the rates laid down in the Bill, and have been as from Budget day. I have looked into the question whether it would be practicable to make refunds of the difference. I would have liked to do so if it had been.

I know that the House always views with scepticism any suggestion that a desirable measure is not practicable administratively. I have borne that in mind in reaching my decision. I must tell the House that if we had sought to


make this provision retrospective we would have imposed a very grave burden on local authorities, who are the collectors of this duty. From the notes with which I have been provided I have worked it out that there would have been about seven different categories of licence to consider. I ask the House to bear with me while I read the administrative provisions referring to one category, to illustrate my difficulty. They are as follows:
Where, owing to a change in vehicle condition or use, extra duty became payable by virtue of Section 10 of the Act on a licence taken out on or after 7th April, 1965, the repayment would be an amount equal to the sum of one-twelfth of the difference between the annual rate proposed in the Budget and the new annual rate appropriate to the former condition of use for each complete month of currency of the licence prior to the change in condition or use, and one-twelfth of the difference between the annual rate proposed in the Budget and the new annual rate appropriate to the present condition or use for each month of the currency of the licence following the change in condition or use, including the month in which that change took place.

No doubt hon. Members would consider that to be simplicity itself—if I may borrow a phrase—but I did not feel that it would be right to inflict that kind of simplicity sevenfold upon local authority officials who have to administer these duties.

Mr. James Scott-Hopkins: I want to deal with the Government Amendment before I refer to the Opposition Amendment to it. It would be very ungenerous of me not to thank the Financial Secretary for the concessions which have been wrung out of him following exchanges which took place in Committee, especially in reference to farmers' goods vehicles and showmen's vehicles.
I appreciate what the Financial Secretary has done in respect of farmers' goods vehicles, after consultations with the N.F.U. Nevertheless, we are a little disappointed at the fact that the Government have not been able to go a little further, especially in the case of the small farmer and horticulturist. The hon. and learned Gentleman must get it quite clear—because this point will occur later, in our discussions on various other Amendments—that we are still dealing with horticulturists' goods vehicles and forestry goods vehicles if used on a private forestry

estate. They are all in exactly the same category as farmers' goods vehicles.
As for the dual-purpose vehicle, this is an important concession, because it was the action of the Government in bringing in the various increases which change the situation in which it had been more expensive to have a private goods vehicle licence than a farmers' goods vehicle licence. The action of the Government changed that situation, and by this Amendment the Government are seeking to restore it—although there is still an increase.
This is to be welcomed. As the Financial Secretary pointed out, the farming industry stands to benefit by having to pay £300,000 less, although it will still have to bear a considerable increase in costs because of these increases in excise duty. As the House knows, there is no way of getting repayment of these increased costs until some problematical time next year, at the Price Review. Nevertheless, we welcome these improvements and the fact that dual-purpose vehicles and trailer vehicles have been included in these categories.
I now turn to the Amendment to the proposed Amendment. This seeks to change the date from August to 6th April. As I expected, the hon. and learned Gentleman based his case entirely upon administrative difficulty. This is extraordinary, because it is entirely through the action of the Government that the situation and muddle arose. In April of this year the increased vehicle duty was imposed and the Government, having had second thoughts about the matter and realising the injustice that is being perpetrated against the farming community, are properly reducing the amount of excise duty required. But those farmers who had to take out licences between Budget day and 1st August have had to pay an increased rate which will never really be brought into effect. This is grossly unfair.
Through the Government's own mess and muddle—that is all it is; they did not exercise enough forethought, or have consultations with the interested people—a proportion of our farming community is having to pay an increased rate which even the Financial Secretary has referred to as being very excessive in respect of some categories of farm vehicle.
A great deal of confusion has been caused by these Government actions. Many farmers have gone to their local authorities and N.F.U. county headquarters to ask why they cannot have their licences at the new rates—because these rates were published as soon as the Government put down these Amendments. The Financial Secretary has said that the only reason why this cannot be done—he admits the justice of the case—is that it is administratively difficult. If he will study his own Amendment he will see that it refers to calculations involving one-twelfth of the duty paid. Those calculations will still have to be made by local authorities, and all that they will be asked to do if the Opposition's Amendment to the proposed Amendment is accepted is one further small calculation.
I suspect that the hon. and learned Gentleman can put before the House many other examples of the complexity of this matter, and its administrative difficulties. Nevertheless, since the Government are responsible for creating this situation it is up to them to find a way out of it. I see no reason why we should penalise farmers simply because of the muddle caused by the incompetence of the Government over this change in the rates. I hope that the House will be able to persuade the Financial Secretary that although there may be administrative difficulties it would be right to change the date to 6th April. If he will do that he will correct an injustice which has been done to many farmers.

Mr. Norman Cole: In all fairness, I must thank the Financial Secretary for his concessions to the farmers. I made a speech in somewhat violent terms in Committee about this matter. However, like my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins), I find the explanation of the administrative difficulty most unconvincing. If this were true, we should never change the old-age pensions, because that means an operation one hundred times more difficult than this and, I understand, involves 60 or 70 different rates and takes seven weeks to carry out. A Government which can do that and a State which can implement the various complicated Income Tax, Surtax, Capital Gains Tax and Corporation

Tax provisions should find this kind of thing child's play.
I could almost work out in my head, without any paper, the example which the hon. Gentleman gave. That is not good enough. On a legal point, what happens to those who wish to license their vehicles, possibly new ones, between now and the coming into law of the Bill? Is that covered by the Provisional Collection of Taxes Act meanwhile, or do they pay the rate when we pass this Amendment, or do they have to pay the old rate and wait till the Bill becomes law at the beginning of August and then get the concession? The whole thing is quite complicated. Maybe there is a simple answer under the Provisional Collection of Taxes Act. I do not know.
How many cases are involved in this very complicated administrative working-out? Is it thousands? Is it a few hundreds? If it is not a monumental number, I will undertake to do this for the Government and I will not be wrong in more than 5 per cent. of the cases. This is not a question of the amount of the increase so much, though that is of some consequence to farmers, especially small farmers; it is the principle that something which was brought before the House on 6th April in the Budget and on which we passed a Resolution is now, about three months later, being countermanded. What of the unlucky people who, in the meantime, thought that the first rate would be law, despite the fact that we were fighting to get it changed, and who are now facing a burden? Singling out one section of the farming community who happen to have acted quickly in this is unfair. I ask the Government to take action.

4.15 p.m.

Mr. John M. Temple: I had the privilege in Committee of moving an Amendment on behalf of the Showmen's Guild of Great Britain. Naturally, I want to thank the Financial Secretary for the new Schedules which he has put down to meet the special case of showmen's vehicles. Would he convey to the Chancellor a personal message from me, to assure his right hon. Friend that I am not a showman, that I am not in show business and that I have no intention whatsoever of entering show business?
Perhaps I might say that I have accepted hospitality from the Showmen's Guild of Great Britain and have enjoyed a banquet with them, at which the smoked salmon was very good indeed. There were more members of the Labour Party at that banquet than of the Conservative Party. I cannot be accused of having any personal interest in the Amendment which I moved in Committee.

Sir Douglas Glover: Is it not obvious that hon. Members on the other side of the House take more interest in the showmen's banquets than they do in the Finance Bill?

Mr. Temple: That may be true.
I thank the hon. Gentleman for the reduction in vehicle duties for showmen's vehicles which makes the increased tax on showmen's vehicles 25 per cent. instead of the general increase of 50 per cent. I am glad that the Financial Secretary recognised the powerful case put forward by the Showmen's Guild on the basis of the extraordinarily limited mileage which showmen's vehicles go in any year.
However, the increase in vehicle charges for showmen's vehicles will be 25 per cent. In 1961, my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), then Chancellor of the Exchequer, increased the general vehicle charges—including the charges for showmen's vehicles—by 20 per cent. The Labour Party, then in opposition, took the view that a 20 per cent. increase was far too great and that the increase should have been halved and should have been an increase of only about 10 per cent. I should like to record the fact that, under the Schedule, the increase will be two and a half times as great as the increase which the Labour Party thought was a fair increase in 1961. I believe that these vehicles charges increases will put up prices throughout the economy. I record this because I know that it is the policy of the party opposite to keep down prices. We must welcome decreases in the increases which were proposed where these are made. Nevertheless, any increase in vehicle duties is a severe increase in the cost of any operation.
I should like, once again, to thank the Financial Secretary on behalf of the Showmen's Guild of Great Britain and

say that they will regard this as a precedent and a happy omen if these vehicle charges are increased once again.

Mr. Eldon Griffiths: My hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) welcomed the concessions which the Government make by this Amendment. I welcome them, too, but with no sense of satisfaction, though possibly with a certain amount of minor relief. In respect of the small farmer and the concessions which the Minister mentioned, I would ask him to put his mind to the case of a farm of 30 or 40 acres with a very small income and one Morris truck.
I am thinking of a particular example. The Ministry may feel that, in raising the duty on the small farmer's Morris truck from £15 to £18, he is raising it very little. I can assure him that, on the farm of which I am thinking—I believe it to be typical—this extra money is extremely hard to find at a time when farmers' incomes are depressed. There will be no outbreak of joy unbounded on the farms at the concession which he appears to have made.
I should like to turn to the Government's inability to make the concession retrospective to the Budget date. I must agree with my hon. Friend the Member for Bedfordshire, South (Mr. Cole) that this is an extraordinary statement. Surely, rebates on motor licence fees are often paid to those who wish to give up their motor licences and put their car in the garage for some months. Why cannot this be applied in this case? The Government seem to feel that it is anybody's fault but theirs. But surely, in the case of those farmers and small businessmen who have already paid the extra licence money which the Government now tell they they need not have paid, it is hardly their fault that they should have had to put up this extra cash.
The Minister says that it would be extremely complicated for the local authorities; but it is not the local authorities' fault that this difficulty should have arisen: it is the Government's fault. I would ask him to look at how this will work on the ground. I can imagine that, in the local council offices, clerks have been charging at one rate for the past few weeks and are now told that they were wrong. They will be told by a number of


farmers who have paid that they have no business charging them that rate. Now comes a fiat from Whitehall which says that it is all changed. Many local government officers will imagine, as I imagine, that the people in Whitehall do not know what they are doing. This confusion is bound to arise at the local level.
I hope that the hon. and learned Gentleman will look at this matter and bear in mind that, however complicated it may be, it is his responsibility that this complication has arisen. It is his responsibility that people have been made to pay money which some can ill-afford and the Government now say, "We did not really intend that they should pay it at all." Surely it is the task of the Government—and no one else—to make restitution to those people who have been mulcted, apparently against the intention of the Government as now expressed, and to put that money back into the pockets of those from whom it was taken.

Sir D. Glover: From this side of the House there have been many congratulations to right hon. Gentlemen opposite on the concessions which they have made. That shows how quickly one can get used to punishment, because, even with these concessions, we have a 25 per cent. increase. Even with the concessions which we have obtained from our bitter battles in Committee, I am not certain that the showmen and farmers will be as pleased as has been suggested, because they will still have to pay a 25 per cent. increase, which is a very heavy addition to their costs and adds to the rising spiral of prices.
It would have been unreasonable for the Chancellor not to have accepted the arguments put forward by my hon. Friend the Member for the City of Chester (Mr. Temple) who, I thought, made one of the most able speeches which have been made during the long debates on the Bill in Committee. After listening to those arguments the Chancellor could not have refused to make the concession. The arguments in respect of agricultural vehicles are overwhelming.
It is right that in some degree we should be grateful for the concessions, but I did not like the Minister's comment that it is not administratively possible to back-date this concession. That

is always the argument when we are discussing a decrease. I have never noticed the Treasury say, when they are dealing with my Income Tax or Surtax, that it would be administratively inconvenient to collect it and therefore they will not do so. They always seem to overcome the administrative difficulties in that respect, but they do not overcome them when there has been a concession.
If the hon. and learned Gentleman has listened to the arguments, then even at this late stage he must realise that the administrative difficulties are not nearly as great as he suggested. There are thousands of motorists who take out a licence, then decide to get rid of their cars, and then get a draw-back on their licence. The administrative machinery must exist in the taxation offices. If it can be done for those motorists, why cannot it be done in respect of this concession? The concession relates only to showmen's and agricultural vehicles. The number involved must be manageable.
I hope that even at this late stage the Financial Secretary will agree to look at the matter again. If he does not, he will create not only hardship but dissatisfaction and a sense of unfairness among those who have already paid the increased charges.

Mr. MacDermot: With your leave, Mr. Deputy-Speaker, and that of the House, may I reply to the debate? Hon. Members are being wise after the event and are complaining that we have not shown greater understanding of these problems before, have not entered into more consultation with the interested parties and did not originally put down the proposals in their present form.
In commenting on any suggested lack of foresight, I can only say that we followed the precedent which was set for us by the previous Government, because they established a percentage benefit for certain types of showmen and for farmers—a percentage reduction in the vehicle excise duty compared with that paid by the ordinary road user. When applying a general increase to the vehicle excise duties we gave the same percentage reduction in respect of showmen's and farmers' goods vehicles as the previous Government had established and had followed when they made their increases.


What we have now done is to make an even more favourable concession to showmen and to farmers than that which they enjoyed under the previous Government.
The hon. Member for the City of Chester (Mr. Temple) is right to say that when there was a general increase in duties last time we urged that it would operate unfairly to showmen and that the increase for these classes should be only half that for the general run of vehicles. But that argument fell on deaf ears.
We have done precisely what we then suggested. We have accepted the argument put forward by the hon. Member for the City of Chester; we have not followed the general rate of increase, but have provided a lower increase so that these showmen have not only the benefit of a lower rate of duty, but, in addition, have the benefit of a lower percentage increase. The same comment applies about the farmers' goods vehicles. Proportionately the concession is greater than it was in the past as a result of proposing a lower percentage increase on certain categories of vehicles.

Mr. Scott-Hopkins: But the Government have changed the categories of farmers' vehicles, too.

Mr. MacDermot: Yes, but except in certain minor ways the effect is not to the disadvantage of the farmers.
I was asked why we cannot make it retrospective. The major objection is administrative. If we had felt able to make it retrospective, Amendments could have been devised to meet the purpose. They would have been exceedingly complicated and lengthy provisions. It is said that the present Amendment would operate unfairly because it would apply only to the people who still had a licence at 1st September. If a farmer took out a four months' licence in April he would not get a refund from the Amendment because the licence would have expired on 31st July and would not be current on 1st September, 1965. That would also apply to someone who surrendered a 12 months' licence before 1st September.
There are other cases, it is true, in which a motorist can get a refund on surrendering a licence, but this involves a simple calculation and presents no great administrative complications. As a result of these Amendments we are throwing

a considerable burden on local authorities, because people will be able to claim refunds in respect of any period after 1st September. If people have taken out licences at the rate laid down in the Budget Resolutions—which, incidentally, were not opposed by hon. Members opposite—and if those licences are still current on 1st September, they will be able to claim a refund for any unexpired portion of the validity of the licence after 1st September.
This in itself will be a fairly complicated matter, but nothing like the complications which, we are advised, would have been involved in trying to make the refund retrospective to 6th April. If the House wishes I can weary them with a detailed account of those administrative complications. I gave an extract from my brief on the matter. I ask the House to accept my assurance that if we had felt that the benefit resulting would have been commensurate with the work involved, we should have brought forward the necessary Amendment.

Mr. Cole: I appreciate that the hon. and learned Gentleman may not have the figures with him, but could he tell us how many vehicles are involved in this matter? Secondly, what would happen to anybody taking out a licence between now and the date when the Bill becomes law?

4.30 p.m.

Mr. MacDermot: The position is that anyone taking out a licence up to 1st September will have to pay the licence at the rate laid down in the Budget Resolutions. For any period after 1st September covered by such a licence, he will be entitled to a refund. As to the number of vehicles involved, I am certain that it is far in excess of 25,000. I will try to let the hon. Gentleman have an approximate figure.
There is, perhaps, one point which I should correct. At the beginning of my remarks, when moving this series of Amendments, I suggested that it would be convenient to take certain other Amendments together. In error, I suggested that we also take Amendment No. 9 when I meant Amendment No. 7.

Mr. Deputy-Speaker (Dr. Horace King): The House will have taken note of that.

Amendment agreed to.

Fifth Schedule.—(VEHICLES EXCISE DUTY)


Further Amendments made: In page 53, columns 4 and 5, leave out lines 38 to 41 and insert:


37
10
0

—



45
0
0

—



52
10
0

—



52
10
0
7
10
0

In page 54, leave out lines 18 to 24 and insert:


1. Farmers' goods vehicles
—
12 cwt.
15
0
0

—




12 cwt.
16 cwt.
16
0
0

—




16 cwt.
1 ton
17
0
0

—




1 ton
1¼ tons
18
0
0

—




1¼ tons
2½ tons
18
0
0
1
0
0



2½ tons
4¼ tons
23
0
0
1
10
0



4¼ tons
—
33
10
0

15
0


1A. Showmen's goods vehicles
—
12 cwt.
15
0
0

—




12 cwt.
16 cwt.
16
10
0

—




16 cwt.
1 ton
18
0
0

—




1 ton
3 tons
18
0
0
1
10
0



3 tons
4 tons
30
0
0
1
15
0



4 tons
7 tons
37
0
0
1
10
0



7 tons
8 tons
55
0
0
1
15
0



8 tons
—
62
0
0
1
10
0

In line 25, leave out "Showmen's goods vehicles".

In line 29, after "vehicles", insert "or showmen's goods vehicles".

In page 55, leave out lines 9 to 15 and insert:


1. Showmen's goods vehicles
—
—
15
0
0


2. Electrically propelled goods vehicles (other than farmers' goods vehicles and showmen's goods vehicles); tower wagons
—
1½ tons
12
0
0



1½ tons
—
18
0
0


3. Other goods vehicles
—
1½ tons
12
0
0



1½ tons
2½ tons
18
0
0



2½ tons
4 tons
27
0
0



4 tons
—
36
0
0

In page 56, line 5, at end insert:


PART VI


TRANSITORY RATES FOR CERTAIN VEHICLES


Part II of this Schedule, for paragraph 2 there shall be substituted the following paragraph—


2. Haulage vehicles, being showmen's vehicles
—
7¼ tons
45
0
0

—




7¼ tons
8 tons
54
0
0

—




8 tons
10 tons
63
0
0

—




10 tons
—
63
0
0
9
0
0

In Part III of this Schedule, in Table A, for paragraphs 1, 1A and 2 there shall be substituted the following paragraphs—


1. Farners' goods vehicles
…
…
…
—
12 cwt.
18
0
0

—







12 cwt.
16 cwt.
19
5
0

—







16 cwt.
1 ton
20
5
0

—







1 ton
1¼ tons
21
10
0

—







1¼ tons
2 tons
21
10
0

15
0






2 tons
3½ tons
23
15
0
1
5
0






3½ tons
—
31
5
0

15
0


2. Showmen's goods vehicles; electrically propelled goods vehicles (other than farmers' goods vehicles); tower wagons.
—
12 cwt.
18
0
0

—







12 cwt.
16 cwt.
19
15
0

—







16 cwt.
1 ton
21
10
0

—







1 ton
2 tons
21
10
0
1
15
0






2 tons
3 tons
28
10
0
2
0
0






3 tons
4 tons
36
10
0
1
15
0






4 tons
6 tons
43
10
0
2
0
0






6 tons
8 tons
59
10
0
1
15
0






8 tons
—
73
10
0
2
0
0

In Part III of this Schedule, in Table B, for paragraphs 1, 2 and 3 there shall be substituted the following paragraphs—


1. Showmen's goods vehicles; electrically propelled goods vehicles (other than farmers' goods vehicles); tower wagons.
—
—
18
0
0


2. Other goods vehicles
…
…
…
…
…
—
2½ tons
18
0
0








2½ tons
4 tons
27
0
0








4 tons
—
36
0
0

—[Mr. MacDermot.]

Clause 10.—(ALTERATIONS IN RELIEFS.)

Mr. MacDermot: I beg to move, Amendment No. 8, in page 7, line 4, at the end to insert:
(7) Where a person is a registered blind person within the meaning of section 9 of the Finance Act 1962 (relief for blind persons) during part only of the year of assessment. that person, or, as the case may be, that person's husband, shall be entitled to relief under subsection (1) or (2) of that section in any case in which he would have been entitled to such relief if that person had been such a registered blind person throughout the year, but the amount of relief granted by virtue of this subsection shall be calculated in accordance with subsection (8) below.
(8) For the purpose of calculating the said amount, the said section 9 shall have effect as if—

(a) for references in subsections (1) and (2) of that section to the amounts of any tax-free disability payments receivable by a person in the year of assessment there were substituted references to the amounts of any such payments receivable by him in the part of the year during which he was a registered blind person within the meaning of that section; and
(b) for references in the said subsection (1) to £100 (relief for one blind person) there were substituted references to that proportion of £100 which the period in the year of assessment during which the person in question was such a registered blind person hears to one year; and

(c) for references in the said subsection (2) to £200 (relief for blind couple) there were substituted references to that proportion of £200 which the sum of the periods in the year of assessment during which each of the persons in question was such a registered blind person bears to two years.

This Amendment gives effect to an undertaking which I gave during our debates on the new Clauses in Committee, when I accepted in principle a proposal put forward by the hon. Member for Somerset, North (Mr. Dean), which found widespread support, that a registered blind person should not have to wait until, in effect, the second year after he became registered before he would be able to claim the benefit of the tax allowance.
As the law stands at present, he can claim the allowance only in respect of the year in which he had been registered for the whole of the year. The Amendment provides that the allowance should be available where a registered person is registered for part of the tax year. This will apply not only in respect of the first year in which he is registered, but also in the case of a person who, through one of the wonderful operations which is done nowadays, recovers from his blindness and, therefore, is registered for only a


part of the year. He will also be able to claim a proportionate part of the allowance in respect of the terminal year as well.

Mr. Scott-Hopkins: I thank the Financial Secretary for tabling the Amendment. It is in line with the powerful arguments which were adduced by my hon. Friends in Committee. The concession will benefit a very small number of people who are in great need, as was well illustrated by my hon. Friends.
The Financial Secretary will be aware that I am particularly anxious about one class of case. Will registered blind people who were registered for a part of the year previous to the passing of the Bill be included in this concession? Very few people can be involved in this class of case, but they may be in the unfortunate position of losing a year's allowance, in regard to the 1962 concession. If the hon. and learned Gentleman cannot give me an answer immediately, I trust that he will look into the matter and perhaps let me know in writing. I thank him once again for the concession.

Mr. Paul Dean: I, too, thank the Financial Secretary very much indeed for the concession which is made in the Amendment and which fulfils 100 per cent. the undertaking the hon. and learned Gentleman gave in Committee. On that occasion he undertook to extend the special tax relief which is available for blind people. I am sure that all hon. Members and the public generally will be extremely grateful to him for this concession. He has, by the Amendment, crowned the special relief for blind people which was introduced in the 1962 Act. I am sincerely grateful to him for having met his undertaking 100 per cent.

Mr. MacDermot: The answer to the question posed by the hon. Member for Cornwall, North (Mr. Scott-Hopkins) is that the Amendment will have effect in the tax year 1965–66 and subsequent years of assessment. It will not operate retrospectively. As the House knows, it is our general principle not to make retrospective alterations in the tax laws. That applies both in the case of reliefs and impositions of taxation. It applies also in cases like this, where there are not,

as has been pointed out, a great many people involved.
The House may remember a case which is familiar to lawyers and which arose some years ago. A husband and wife were killed simultaneously in a car crash. Because one was deemed by the then law to have pre-deceased the other and there was a double liability to Estate Duty, in the subsequent Finance Bill the law was altered. The same question was raised and argued as the hon. Gentleman has raised, but the pleas for retrospection were rejected. That was done in the 1958 Finance Act and, even in the case itself which gave rise to the change in the legislation, the old law had to run its course.
There are various reasons for this. One is that any past date that is chosen would inevitably appear arbitrary. It could be argued here that as the allowance itself was imposed in the 1962 Finance Act, one could make it retrospective to that date. It sounds attractive, but it is still arbitrary. Whatever date in the past one chose there would still be people in the year before. They could still say, "Why should not we have the benefit of this?"
There are other reasons, too, but I regret that we have felt it right to adhere to the precedents and make it operate from the current year.

Amendment agreed to.

Clause 12.—(SURTAX ON INCOME UNDER CERTAIN SETTLEMENTS, 1952 C. 10.)

Mr. Deputy-Speaker: The next Amendment, No. 228, in the name of the hon. Member for Nottinghamshire, South (Mr. William Clark) in line 14, at end insert:
Provided that for the purposes of this section any scheme or arrangement whereby the individuals carrying on a business or profession in partnership pay any pension or annuity to an individual who has retired from the partnership or to the widow or widower of an individual who has been a partner shall not be treated as a settlement if the Commissioners of Inland Revenue are satisfied—

(a) that such pension or annuity first becomes payable on attainment by such individual of the age of 65 or any greater age or on earlier retirement through incapacity or on death of such individual; and
(b) that the aggregate value of any benefits afforded by such a scheme or arrangement is reasonably comparable to the value of the benefits usually afforded by statutory


superannuation schemes in similar circumstances or by such a scheme as would be approved by the Commissioners if the partnership was a company; and
(c) that such pensions and annuities are not assignable or commutable in whole or in part; and
(d) that in the case of any pension or annuity payable to such individual who shall retire at the age of 65 years of any greater age such individual was on 1st April 1956 over 50 years of age; and
(e) no service of such individual otherwise than as sole proprietor of or as a partner in the business or profession shall be taken into account for the purposes of paragraph (b) of this proviso.

is not selected for separate debate, but may be discussed with Amendment No. 305.

Mr. MacDermot: I beg to move Amendment No. 305, in Page 7, line 25, at the end to insert:
(3) Notwithstanding subsection (1) of this section, subsection (1) of the said section 415 shall not apply to income consisting of annual payments made—

(a) under a partnership agreement, by a member of a partnership to or for the benefit of a person, or, if he is dead, the widow or dependants of a person, who has ceased to be a member of the partnership by retirement or death; or
(b) by any person, in connection with the acquisition by him of the whole or part of a business, to or for the benefit of the person from whom it is acquired or, if he is dead, his widow or dependants;

being, in either case, payments made under a liability incurred for full consideration, or to income arising under a settlement made by one party to a marriage by way of provision for the other after the dissolution or annulment of the marriage or while they are separated under an order of a court or under a separation agreement, being income payable to or applicable for the benefit of that other party.
This Amendment gives effect to an undertaking which I gave in Committee in our debate on Clause 12 when dealing with covenanted annual payments by the continuing members of a partnership to a retired partner. I pointed out at the time that if a concession was to be made—and I indicated that we were favourable to the idea—in logic, it should also be made to apply to payments by the purchaser of a business to the vendor and payments by a separated or divorced husband to his former wife.
The main purpose of Clause 12 is to deny Surtax relief to individuals who make payments under convenant to other

individuals by way of bounty. It is not intended that the Clause should apply to annual payments which are in the nature of bona fide commercial payments made for full consideration in connection with a business on a partner's retirement, or the sale of a firm. Equally, similar considerations apply in the class of covenant between husband and wife to which I have referred. All three classes are covered by the Amendments which we are considering.

Mr. John H. Osborn: I thank the Financial Secretary for an Amendment, which will go a long way and have a great effect, though admittedly on very few people, and I refer, in particular, to professional people. It was for them that I moved an Amendment in Committee. I wrote to the Financial Secretary because there were various types of partnerships involving those on retirement or widows, and I find those concerns that were incorporated were able to make adequate "top-hat" provisions. Those that were not incorporated, particularly members of the Law Society, chartered accountants, surveyors, auctioneers and valuers, were at a disadvantage. This concession will go a long way to meet the problems of dependants of professional people.
I would be grateful if the Financial Secretary would endeavour to clarify certain specific points. In paragraph (a) the words "under a partnership agreement" are referred to. Lawyers with whom I have discussed it would like to delete the words "partnership agreement" and insert "partnership agreement or arrangement". They have stressed that in a professional partnership there is no question of full consideration applying, but there is a moral arrangement between partners with those who have retired, and widows and dependants of partners. I presume it is not the intention in the case of a partnership that that sort of arrangement should be formally written into a deed of partnership.
The assurance I ask for is: would the Board of Inland Revenue be satisfied with a loose arrangement of the kind I have tried to apply—a type of moral obligation which partners have accepted for those who retire? Perhaps the Financial Secretary would look at this again, because it is possible that there has been


a slight misprint. I should have thought there were three sections here: (a) dealing with a partnership agreement, (b) dealing with the acquisition of a business, and (c) concerned with marriages. I would have liked item (c) inserted before "or to" in line 8 of the Amendment. All I would ask is: where does full consideration come into dealings with widows and dependants?
4.45 p.m.
My third point is that new subsection (3) is a negative one. It cancels Section 415 of the 1952 Income Tax Act, which is also a negative one. Do payments to retired partners or their widows and dependants have to be for seven years or more under a deed of covenant? Can they be for a shorter period, and do they have to be subject to a deed of covenant at all for this exemption?
My fourth point is: has the position been made adequately clear about the capital value of annuities purchased, particularly so far as Estate Duty is concerned? The Financial Secretary did write to me about this. He quoted the case of re Miller's Agreement, Uniacke v. Attorney-General, and he said, at the end of his letter:
This case is generally followed, and unless the agreement were so worded as to give the widow an enforceable interest—which would not normally happen—as the law stands no question of estate duty would arise.
He has given me that assurance in writing to satisfy a number of uncertainties, and I would be grateful if he could confirm it.
On the question of renewals of existing seven-year covenants, there is some need for legal clarification. There is no such thing as a partnership agreement with a widow or a dependant, as I understand it, and, as I have mentioned before, there is no question of full consideration.
I would like to quote an example. Partners A, B and C have an arrangement to look after the dependants or the widow of any one of them who is unfortunate. Partner C dies and, as I see it, it could well be that partners A, B and X agree to look after widow C. Eventually, one could get a situation where partners X, Y and Z looked after widow C. Can a new partnership deed provide for the continuation of the annuity to the retired person or widow?
One specific question which I was asked when I discussed this Amendment with those involved was this. Partners do accept a moral obligation to look after the widows of those who have retired and died. It is sometimes necessary to increase the annuity, particularly in the case of a widow of a partner who died many years ago. Is it in order, under this type of arrangement, to obtain Surtax relief on this increase?
I appreciate that these are searching questions, but this is the sort of clarification that will be required, and I shall be very grateful if the Financial Secretary will go as far as he can to let us know what is in his mind. It is a great concession, and has been welcomed. These are points of detail, and as much clarification as possible will be appreciated.

Mr. Graham Page: May I, too, express satisfaction at the Financial Secretary having given this very important concession to a case which was so strongly argued from this side in an earlier stage of the Bill. Had it not been conceded, as the Bill stood there would have been very considerable hardship in that the payments described in this Amendment would have been the income of the payers for the purpose of Surtax. In the previous debate, the Financial Secretary admitted that there was a case for the three types of payments mentioned in the Amendment to be restored to the exceptions in Section 415 of the Income Tax Act, 1952. The arguments had been directed towards the two types of payments in paragraphs (a) and (b) of the Amendment; that is to say, payments in respect of partnership agreements, and payments in respect of the acquisition of a business.
I am sure that the Financial Secretary would wish to acknowledge the assistance coming not only from hon. Members on this side, but also from the professions outside—particularly the Law Society—which made representations to him. On that previous occasion, the hon. and learned Gentleman produced, out of the blue it seemed, the third type of payment which appears in the Amendment, and I think that he will acknowledge the representations made to him by the Law Society in that respect, too.
Although my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn)


has referred to a number of points of drafting, I should have thought that the Amendment covered the subject adequately, and it is a great satisfaction to us that this concession has been made to arguments so strongly put from this side.

Mr. Charles Fletcher-Cooke: I should like to reinforce what has been said about "full consideration" as applied to widows or dependants. There may be no provision here, but if we have what way be regarded as a non-contributory pension—and particularly a non-contributory pension paid to a widow or dependant—it seems to me that there might be some danger in saying that it is not under a liability incurred for full consideration, and that there is an element of "bounty" in it—which was the word used by the Financial Secretary as being objectionable for reasons which we follow. If there is an element of bounty here—and I think that there is—we should not like the purpose to be vitiated by it.
If the hon. and learned Gentleman is to speak again, perhaps he will pay particular attention to what in this context the words "full consideration" mean, and what the word "bounty" means.

Mr. MacDermot: If I have the leave of the House to speak again, I can say that we have considered the points raised by hon. Members, and by the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) and the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) in particular. Perhaps I might deal with their remarks first.
As the hon. and learned Member surmised, the distinction we draw is between covenants that are in the nature of a bounty and covenants that are of the nature of business or commercial transactions. For that reason, we do not think it possible to extend the relief in the case of annual payments that are made ex gratia or for less than full consideration to the retiring partner or the dependants of a deceased partner.
I hasten to stress that this does not mean that the widow of a partner is left out of these provisions. She is included, provided she is provided for in the original agreement. If no provision is

made, say, at the time of the retirement of a partner that the covenant shall inure to the benefit of the widow, and he then dies, and the surviving partners decide, in effect, out of their bounty, which is what it is, to make provision for the widow, it does not fall within the class of case with which we are concerned.
The reason for our preserving the distinction is that it would not be possible for us to make a concession in this type of case wthout undermining the Clause in other cases. It could then extend to ex gratia payments made not only to a former partner or his widow, but to other persons who might have been connected with him—an instance is a former servant. It could be extended also, and could be abused in various ways. One can imagine the difficulties that would flow, for example, in the not infrequent case where a father and son go into partnership together. A lack of the distinction would open up an easy way in such a case for the son to get a Surtax reduction for an annuity paid to his father ex gratia which, in the normal way, would be disallowable for Surtax purposes. We must, therefore, preserve the distinction that is contained in the present wording of the Amendment.
The effect is that renewals of seven-year covenants, as such, will not apply and, again, there is no need to do so, because it is a perfectly normal provision in such covenants to make them run for life if that is what is desired. If the partners do not agree to that, but only to a covenant for a limited period and there is a renewal later, that is bounty. It is an ex gratia payment.
I confirm the passage which the hon. Member for Hallam read from my letter to him that that is our view of the Estate Duty position, and the Revenue will act accordingly. I may not have covered one or two points in the numerous questions that the hon. Gentleman put to me, but perhaps he will allow me to study carefully what he said. I can reply then with more accuracy than I think I could now. I thank the hon. Member for Crosby (Mr. Graham Page) for what he said about the Amendment, and gladly respond to his invitation to acknowledge our debt to the assistance we have had in these matters from the Law Society and other professional bodies.

Mr. William Clark: It would be churlish for anyone on this side of the House not to welcome this Amendment, but I know that the Financial Secretary will agree that it was sparked off by the assiduous work of my right hon. and hon. Friends—

Mr. MacDermot: And the Law Society.

Mr. Clark: In addition to that of the Law Society. The spirit and principle of the Amendment was raised by us in Committee. Even for the Committee stage the Chancellor put down well over 260 Amendments and has put down well over 200 Amendments for the Report stage. Amendments have littered the Notice Paper because of the initiative shown on this side.
I am sure that the Financial Secretary will agree that when, in a partnership agreement, provision is made for the dependants or the widow of a retiring partner, it is essential for the partners to cover every eventuality. I am sure that I am right—and perhaps the hon. and

(8) This section shall apply in relation to the provision of a gift as it applies in relation to the provision of entertainment, except that it shall not by virtue of this subsection apply in relation to the provision for any person of a gift consisting of an article incorporating a conspicuous advertisement for the donor, being an article—


(a) which is not food, drink, tobacco or a token or voucher exchangeable for goods; and


b) the cost of which to the donor, taken together with the cost to him of any other such articles given by him to that person in the same year, does not exceed £1.

and also the Opposition Amendment to Amendment No. 315 in line 8, at end add "exclusive of purchase tax".

Mr. Deputy-Speaker: If the House has no objection.

Mr. Diamond: The purpose of the Amendment and Amendment No. 315 is to provide exemption from the restriction upon which the Bill at present insists in regard to entertainment expenses. The Committee decided that entertainment expenses shall not be allowed except so far as entertainment of foreign buyers is concerned, but it was, of course, always understood that normal advertising expenditure in the ordinary way would be an allowable expense. However, there is a field between normal advertising expenditure and entertainment expenditure which requires to be defined.
There was a discussion in Committee when it was sought that gifts up to £3 in value should be allowed for Income

learned Gentleman will confirm by a nod that I am—in believing that if, in the original partnership agreement for the retired partner, there is provision that the income can go for as many years, or for the life of the widow, it can be varied upwards. That, I think, would take it out of the definition of bounty.
We acknowledge the justice that is now being done, particularly to professional partnerships, but I must again remind the House that this concession was squeezed out of the Government by hon. Members on this side.

Amendment agreed to.

5.0 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move Amendment No. 9, in page 9, line 29, to leave out "and gifts".
Perhaps it would be convenient to discuss with this Amendment the Government's Amendment No. 315, in page 10, line 13, at end insert:

Tax purposes, but it was demonstrated that that could be an alternative way of providing entertainment expenditure in the form of bottles of whisky and so on. We did not want to stop trade advertising in the various ways in which it is pursued so long as it did not conflict with what is normally allowed for entertainment expenses.

The effect of these Amendments is to provide an exception to the general disallowance where the gift consists of advertising material for the donor other than, food, drink, tobacco or a token or voucher exchangeable for goods subject to the condition that the aggregate value of the gifts made by any donor should not exceed £1.

This would mean that gifts of calendars, trays, diaries and the like, stamped with the name of the donor and being clear advertisements and not of such value that added to another gift of the same donee would amount to more than £1, would


be allowable for tax purposes. The Opposition Amendment to Amendment No. 315 requires that the £1 should be regarded as exclusive of Purchase Tax. This the Government would not be able to recommend to the House because it would introduce a complication which is much too difficult and unnecessary in these circumstances.

The tax rates, in most cases, will be 25 per cent. Corkscrews conjure up an acceptable form of advertising gift not quite entertainment expenditure, but not wholly irrelevant thereto, and on them the rate of tax would be 10 per cent. It would be very difficult for those involved in this business to know what rate of tax is involved or to cope with a situation if the rate of tax was altered, as it might be from time to time. If the amount of £1 were inclusive of Purchase Tax, this would be the right way to deal with the altered situation.

After full consideration with the two main trade associations concerned, the Government decided that it was right and it would be quite convenient for £1 inclusive of Purchase Tax to be the limit. Diaries and calendars are normally of a maximum price of 15s. and the other items are of small value. The figure of £1 is not unduly restrictive but the complication of making this free of Purchase Tax would be difficult. I hope that the Amendment I have moved, associated with Amendment No. 315, will be acceptable to the House.

Mr. William Clark: As the Chief Secretary said, this matter was raised in Committee and was given a very full hearing. The object of the Bill originally was to exclude all sorts of gifts. We now have an extraordinarily complicated position which should be brought to the attention of the House. First, the Government say in their original Bill that no gift should be allowable. Then the Chancellor, after certain representations and following the debate in Committee, tabled an Amendment excluding calendars and diaries. I believe that that Amendment was tabled last Thursday. On Friday, the Opposition tabled an Amendment to the Amendment cutting out calendars and diaries and asking that the whole range of gifts used in an advertising sense should be excluded from the imposition on entertainment expenses.
On Tuesday this week, the Government had a third thought and tabled Amendment No. 315. I understand that for one reason or another various things happened yesterday, and that but for that it would have been possible to have reached this Clause yesterday, or in the early hours of this morning. I shall not go into the reasons why we did not go so far as Clause 14. The Government thought once and were wrong. They then listened to my hon. Friends putting forward powerful arguments and very valid points.
The Government thought again and excluded calendars and diaries. Then they had another think and yesterday put down their Amendment so that the Opposition are precluded from tabling an Amendment which could have been debated in other circumstances yesterday. Short of moving a manuscript Amendment, the Opposition are deprived of putting forward another Amendment on this question.
The Amendment to Amendment No. 315 is a starred Amendment. It is tabled to draw attention to the fact that in this whole matter the Government have acted in a hasty and ill-considered manner. One difference between our Amendment to the Chancellor's first Amendment and Amendment No. 315 is that the Chancellor now says that if in one year the various gifts made to customers or potential customers are added together the value must not exceed £1. A second difference is the exclusion of Purchase Tax. Obviously, there is a complication if one excludes Purchase Tax, but I do not think it a valid argument to say that it is so complicated that it cannot be accepted.
On the question whether the amount should be £1 or not per year, we should compare what other countries do. Other countries have similar restrictions in their fiscal legislation about entertainment gifts. In America, one is entitled to provide a gift of up to 4 dollars, which is well above £1. In Germany, one is able to make gifts in an advertising sense of up to £9 a year. In this country, the Government say it must be £1. If there were so much complication the Chancellor could have made the amount 22s. 6d. to cover Purchase Tax. The whole of this Bill in Committee and on Report has shown that time and time again the Government make three or four attempts at


the same point and never until they are pressed by my hon. Friends do they seem to see sense.
Of course, we welcome half a loaf as being better than no bread, but the Government are being typically niggardly about this matter. It is typical of the niggardliness of the Socialist Government that the Chief Secretary says proudly, "You can now give a corkscrew as a gift" and that he is taking away the bottle. This is typical Socialism. "You can have the good things in life, but not today; we shall show you how to open them but we will not give you anything to open". If the Chief Secretary speaks again, I am sure that he will pay tribute to the work put into this problem by my hon. Friends and will admit that the Government have again yielded to pressure and constructive criticism from this side of the House.

Mr. Norman Miscampbell: One can at least welcome this Amendment. We have had two or three goes at this problem. It seems incredible in view of what would have been suffered under the original ideas put forward by the Government that a change was not made long before. Now, at last, those employed in a considerable industry in my constituency will be relieved of what appeared to be a heavy burden. May I briefly show how important the Amendment is. I can give some figures relating to a firm in my constituency called Starline Business Gifts. Eighty per cent. of its business would have been affected by the Government's original proposals. The first Amendment relieved about 20 per cent. of its business. Of the remaining business, 50 per cent. is now relieved of the impost because of the Government's change of mind and the decision to allow any form of gift advertising.
The giving of ashtrays and ballpoint pens with the names of the donors on them is perhaps the most effective way of making the small trader remember the donor's name. It is as though he was given a card which he had to use and see every day. As such, this is the most legitimate form of advertising.
I did not know until I looked into the matter that almost 100 per cent. of the holders of motor vehicle licences which are stuck on car windscreens are produced

in Blackpool. All of these holders carry the name of the person or firm who sells the car to the purchaser. This is also a very legitimate form of advertising, and a very effective one.
On behalf of the 190 people employed in the Blackpool firm I welcome the Amendment. It appears that common sense has at last triumphed. However, I wonder whether the term "common sense" can be applied to the last two lines of the Amendment. I can understand the Government's desire to limit the gift to £1. If the House seeks to pass legislation which is enforceable, it is not practicable to say, "But you may give them only £1 worth of goods in any one year".
In practice, gifts of this sort are handed out by tradesmen moving round the town or the county. It will be almost impossible for them to say, "You had an ashtray last week. You are not entitled to a ballpoint pen next week". In any case, it would be sufficient if the total value of the gift were limited to under £1. There is a limit to the average human being's appetite for ballpoint pens, ashtrays, and holders for motor vehicle tax certificates. With these cautionary words, the Amendment is to be welcomed.

Mr. Donald Box: I seem to remember that when we discussed this subject in Committee the Chief Secretary had some difficulty in distinguishing between a bottle of whisky and a diary. This was no doubt due to the late hour at which we discussed the matter. Like my hon. Friend the Member for Blackpool, North (Mr. Miscampbell), I welcome the Amendment, because it seems that in some corners of the Government at any rate common sense sometimes prevails. However, I have reservations, because I want to take up one word in the Amendment as proposed.
I refer to the word "conspicuous" qualifying the word "advertisement". We are entitled to ask the Chief Secretary what he means by "conspicuous". It is obviously the Government's intention that the advertiser's name should appear on the gift, but it can appear in various sizes and various degrees of prominence.
May I show the House an example which I produced at about 4.30 in the morning in Committee and which did not


cause much stir then? I do not think many people would dispute that what I now hold in my hand is a prominent advertisement and it would, therefore, seem to fall within the terms of the Amendment. I now hold in my hand a diary on which there is a very discreet advertisement. I have here a case designed to contain a cheque book; it has on it the name of one of the Big Five banks which is even more difficult to discern. In fact, the name can hardly be seen.
This will be a difficult Amendment for inspectors of taxes to interpret. One of the fears I have about the Bill is that far too much discretion is being placed in the hands of inspectors of taxes. It is not fair to them, nor is it fair on taxpayers, that they should be placed at the mercy of the discretion of inspectors of taxes in various parts of the country whose views may differ considerably.
That is all I want to say, except to express the rather pious hope that in regard to the word "conspicuous" the Chief Secretary will allow common sense to prevail once more and give us his interpretation of how this part of the Amendment will apply in practice.

5.15 p.m.

Mr. Geoffrey Hirst: As the Member who moved the Amendment in Committee which gave rise to this discussion, I want to say something about it. I made two speeches on the subject in Committee, so I will not go into the merits of the argument again, because they are well known.
I agree with my hon. Friend the Member for Nottingham, South (Mr. William Clark) that the Government think many times about some things. However, there are times when they do not think at all. This matter started by the Government not thinking at all, but it ended by them thinking many times in a rather confusing way. The Amendment I moved in Committee was tabled by my hon. Friend the Member for Barry (Mr. Gower). I took it on late at night without having had much notice. I managed to put my case over rather better than the Government have done, though they have had several weeks' notice. The Government could have had this discussion with the trade earlier—I know that to a certain extent they did have it—and thereby have saved themselves a good deal of trouble.
The Government now argue that if the figure was stipulated to be exclusive of Purchase Tax the matter would be made very difficult, because of the varying rates. They argue that the right way to go about it would be to set a limit on the gift of 25s. They could at that stage have done all the thrice thinking which they have been doing since, more or less huffing themselves at a Treasury game of halma.
It is very niggardly of the Government to start arguing about the Purchase Tax question at this stage, when we cannot do much about it. I said in my concluding speech in Committee, with that graciousness which comes to me at four o'clock in the morning, that the Government would look incredibly stupid if they did not do something before Report. My prognostication has brought off a double. The Government have managed to be incredibly stupid and they have done something before Report. I did not expect that when I made that remark.
The Government have done something, even if they have got the House into a muddle on this matter. However, it will be a considerable help to the trades concerned. I cannot think that the Chief Secretary will expect too much praise—only a little; I am giving a little today—in a matter like this, which could have been cleared up in about half an hour's conversation with the trade. After I spoke to my hon. Friend the Member for Barry, I spent three minutes making a trunk call and waking somebody in the middle of the night. On S.T.D.—it worked on that occasion—I got the answer in about three minutes, which I thought was rather good. Armed with that answer, I made two substantial speeches in Committee. Therefore, I feel that the Government might have done more about it.
I still think that in one way or another they should meet the case we seek to make on the starred Amendment to their Amendment. I do not know how it can be done at this stage. That is one of the difficulties we face on Finance Bills. They should think the matter out properly and not table one Amendment after another and then oppose an Opposition Amendment with the minimum of consultation. That is a peculiar way of going on. Although they have substantially


met the point, they will not get more than five marks out of 10 from me on this occasion.

Mr. J. H. Osborn: I have in my constituency a firm which manufactures gifts such as calendars, and this Amendment will make a vast difference to its business. This Clause could have wiped out a perfectly legitimate business of making gifts.
There is sentiment in business, and, but for this Amendment, the Clause would have wiped out a lot of sentiment which counts for much. I have here a pen bearing the name of an American company on it. I visited that company 18 months ago, with an inadequate pen. That company is a customer of mine. This is the sort of gift which will register in my mind, as it will register in the minds of hundreds of people. It is the type of gift that counts. Those who have to decide what gifts to give and when to give them can get a headache if they also have to decide whether these gifts are part of an advertising campaign or whether they are designed to cement friendship.
These gifts are not only for top executives. I have a typical gift here. It has my name on it, and, in fact, I have an interest in it. It is the sort of gift which goes to the man on the shop floor. It is a ruler. It is a form of legitimate advertising. Whether the name on it is conspicuous or not is another matter. The same might apply to a pocket knife. This is the sort of gift which is acceptable by people on the shop floor. It is reasonable that this Amendment should be accepted for it permits this sort of article to be given and it cements a friendship between the seller and the man who uses industrial products.
The only question that I raise is whether the value of these gifts is sufficiently high. At this point I am moving from the shop floor to the higher levels. Yesterday someone who is much concerned with the home trade pointed out that those who try to invade our home market by importing from overseas or exporting from overseas into this country usually have to be in the position of entertaining and giving gifts which have considerably greater impact than our own

home salesmen can give. A person who is trying to serve the home market may well find that gifts and advertising gimmicks from overseas are so much better than our own, and it is regrettable that the proposal to extend the value of such gifts was not accepted. The present figure is much too low, but no doubt we can deal with that point on some future occasion.

Mr. Raymond Gower: This matter has had a most astonishing history. When, together with my hon. Friends, I put down the original Amendment which referred merely to diaries and calendars, I recalled the despondency expressed by so many people connected with the printing and preparation of these articles. Indeed, Dr. King, the Government, by their attitude and their unwillingness at that stage to accept that narrow Amendment, gave the impression that they were opposed to the whole idea. As these diaries and calendars are printed so long in advance, tremendous anxiety was created in the printing works and in the firms which place orders for these articles a long way ahead. Dr. King, I can reveal that even among the employees in one or two firms which I consulted there was a good deal of anxiety about this matter—

Mr. Deputy-Speaker (Dr. King): Order. The hon. Member has been in the House for a long time. He must know that we are not in Committee, and he must address the Chair properly.

Mr. Gower: I apologise, Mr. Deputy-Speaker, for addressing you incorrectly.
As I was saying, there was a good deal of anxiety among the employees. In due course a new Clause was put down by the Government and we moved an Amendment to extend it to certain other named articles, and again we received no intimation that this was at all acceptable to the Government. The ridiculous nature of the proposal at that time was that it would have permitted a calendar or a diary but it would not have permitted an address book or an engagement book or something of similar size and value.

Mr. Hirst: Nor an ashtray.

Mr. Gower: As my hon. Friend the Member for Shipley (Mr. Hirst) points


out, it would not have permitted an ashtray—nor a ballpoint pen. Apparently yesterday the Government decided that they were prepared to put down a reasonable Amendment. However, I join with my hon. Friend the Member for Cardiff, North (Mr. Box) in drawing attention to the word "conspicuous". I do not think it should be included. Surely one does not expect the name of the advertiser on an advertising diary to be particularly conspicuous. One expects the advertising to be done in a rather dignified manner. Dignity rather than prominence is usually the feature for which we look. A conspicuous advertisement might be most undignified and reflect discredit on the person who prepared it. Therefore, I hope the Chief Secretary in replying will define this term "conspicuous", or, if possible, move a manuscript Amendment to delete it.
In addition, I hope the right hon. Gentleman will address himself to this further point. As my hon. Friend the Member for Blackpool, North (Mr. Miscampbell) observed, this wording is ridiculously tight in that it cannot reasonably be applied. With the greatest care nobody could ensure that two of these articles might not from inadvertence go to the same donee, and the wording therefore seems unnecessary.

Mr. Diamond: With your leave, Mr. Deputy-Speaker, and that of the House, I should like to reply. I have been asked by two lawyers to say what is the meaning of the word "conspicuous". I am advised that the meaning is conspicuous. A business man seeking to give an advertising gift would not wish the name to be so discreetly hidden as incapable of being read except by turning the article upside down and using a magnifying glass. Therefore, it is perfectly reasonable that the word "conspicuous" should be in the Clause to make clear that what we are talking about are advertising gifts and not gifts.
Therefore, as every hon. Member has in his own way welcomed the Clause and as, in particular, I have been given something which I never thought I should live to receive—five marks out of 10 from the hon. Member for Shipley (Mr. Hirst)—I call this my day of days.

Amendment agreed to.

Further Amendment made: In page 10, line 13, at end insert:
(8) This section shall apply in relation to the provision of a gift as it applies in relation to the provision of entertainment, except that it shall not by virtue of this subsection apply in relation to the provision for any person of a gift consisting of an article incorporating a conspicuous advertisement for the donor, being an article—

(a) which is not food, drink, tobacco or a token or voucher exchangeable for goods; and
(b) the cost of which to the donor, taken together with the cost to him of any other such articles given by him to that person in in the same year, does not exceed £1.—[Mr. Diamond.]

Clause 16.—(AMENDMENTS OF CASE VII OF SCHEDULE D.)

5.30 p.m.

Mr. MacDermot: I beg to move, Amendment No. 12, in page 11, line 30, at the end to insert:
(5) A gain shall be exempt from tax chargeable under Case VII if accruing from the acquisition and disposal by any person of a decoration awarded for valour or gallant conduct which he acquired otherwise than for consideration in money or money's worth.
This is an Amendment which we have put down in response to an undertaking given in a short debate raised in Committee by the hon. Member for Ormskirk (Sir D. Glover), who suggested that it would be desirable, if we could, to exempt from liability to Capital Gains Tax decorations awarded for valour or gallant conduct. This was apparently stimulated by the recent sale of a Victoria Cross for over £1,000. Occasions when such a chattel could give rise to a liability must be rare indeed, but I think the House was impressed with the argument that if we could exempt this, in particular where the medal was being disposed of either by the original recipient or a member of his family, it was desirable to do so.
We undertook to look at this. I hope that we shall have at least five marks out of ten on this occasion, because we are not only doing what we were asked to do but we are taking the matter a little wider, because we thought that rather than limit it to disposal by the recipient or a member of his family we should cover also any disposal by someone other than a person who had acquired it by purchase. This would eliminate any speculative dealings in such medals from


the exemption and I am sure that this would appeal to the House. This Amendment exempts from liability to short-term tax. There is a later Amendment proposing similar exemption from long-term tax.

Mr. John Hall: I respond with the greatest pleasure to the Financial Secretary's invitation to give him five marks out of ten. He deserves them for getting this right on the second attempt, but the direct crib was given by my hon. Friend the Member for Ormskirk (Sir D. Glover), who I am sorry is not here to take a bow for persuading the Government to move this very necessary Amendment. We welcome it, and we might consider giving the Financial Secretary an extra half mark for taking the matter further than was originally suggested. I sit down pleased with the progress of our pupils and hoping that they make further progress as we go on.

Amendment agreed to.

Mr. Deputy-Speaker: We come now to Amendment No. 13, with which it is proposed that we take Amendment No. 282, in page 28, line 29, at end insert:
(4) British Government securities shall not be chargeable assets.
and Mr. Speaker would allow a Division on Amendment No. 282 if asked for.

Mr. Diamond: On a point of order. Would it be convenient, Mr. Deputy-Speaker, to you and the Opposition if in addition to these Amendments we consider at the same time the related Amendments? They are Amendment No. 57, in page 28, line 25, at end insert:
(2A) If the adjusted sale price and adjusted purchase price to be taken into account under Schedule 6 to this Act in computing the amount of a gain accruing on a disposal of securities of one of the descriptions in Schedule (Capital gains: Government securities issued at a discount) to this Act are both within the exempt price range specified in that Schedule for those securities a gain accruing on that disposal shall not be a chargeable gain (and a loss so accruing shall not be an allowable loss) and if the range between those prices overlaps that exempt price range a proportion of a gain so accruing shall not be a chargeable gain, which shall be the proportion which the part of the range between those prices which overlaps that exempt price range bears to the whole of the range between those prices (and correspondingly a part of a loss so accruing shall not be an allowable loss).

In this subsection "adjusted sale price" means the amount of the consideration for the disposal and "adjusted purchase price" means the amount of the consideration for the acquisition (that is the acquisition by the person making the disposal), both adjusted, where the nominal amount of the securities being disposed of is not one hundred pounds, to represent a price for a nominal amount of one hundred pounds.
Amendment No. 95, in page 77, line 38, at end insert:
(2) If in consequence of a conversion on their redemption date of securities of one of the descriptions in Schedule (Capital gains; Government securities issued at a discount) to this Act any securities of that description and a new holding of Government securities are, under paragraph 4(2) of this Schedule as applied by this paragraph, to be treated as the same asset acquired as the converted securities were acquired, and the adjusted purchase price (as defined in section 26(2A) of this Act) of the converted securities is less than one hundred pounds then, in computing under Schedule 6 to this Act the gain accruing on the acquisition and disposal of the new holding, or any part of the new holding, there shall be added to the amount of the expenditure which is allowable as a deduction the amount of the gain which would have been exempted from being a chargeable gain by virtue of the said section 26(2A) if the converted securities, or as the case may be the corresponding part of them, had been disposed of at the time of their redemption for a consideration equal to their nominal value.

Amendment No. 118, which is the new relevant Schedule:

SCHEDULE

CAPITAL GAINS: GOVERNMENT SECURITIES ISSUED AT A DISCOUNT

Description of Government securities
Exempt price range (for £100 nominal of Stock)



from
to


5½% Exchequer Stock 1966
99½
100


5% Exchequer Stock 1967
96½
100


4% Exchequer Stock 1968
98
100


3½% Conversion Stock 1969
99
100


3% Funding Stock 1959/69
98
100


British Electricity 4½% Guaranteed Stock 1967/69
98½
100


5% Conversion Stock 1971
98½
100


British Gas 3½% Guaranteed Stock 1969/71
98
100


6% Conversion Stock 1972
97½
100


British Gas 4% Guaranteed Stock 1969/72
98
100


British Transport 3% Stock 1968/73
73⅛
100


5¼% Conversion Stock 1974
97½
100


4% Victory Bonds
85
100


British Electricity 3% Guaranteed Stock 1974/77
99½
100


British Transport 4% Stock 1972/77
95½
100


5% Exchequer Stock 1976/78
96
100

Mr. Nigel Birch: That would be quite convenient.

Mr. Deputy-Speaker: The Chair has no objections, since both sides of the House concur, but it helps the Chair if it is informed in advance of these things. The Chair has to protect the rights of single Members who might be affected in some way.

Mr. Diamond: I am grateful to you, Mr. Deputy-Speaker, particularly since apparently you have not received notice that these Amendments were related to one another.
I beg to move, Amendment No. 13, in page 11, line 40, at the end to insert:
(6) If the adjusted sale price and adjusted purchase price to be taken into account in computing the amount of a gain accruing from an acquisition and disposal of securities of one of the descriptions in Schedule (Capital gains: Government securities issued at a discount) to this Act are both within the exempt price range specified in that Schedule for those securities a gain accruing on that disposal shall be exempt from tax chargeable under Case VII (and a loss so accruing shall not be an allowable loss) and if the range between those prices overlaps that exempt price range a proportion of a gain so accruing shall be so exempt, which shall be the proportion which the part of the range between those prices which overlaps that exempt price range bears to the whole of the range between those prices (and correspondingly a part of a loss so accruing shall not be an allowable loss).

In this and the next following subsection "adjusted sale price" means the amount of the consideration for the disposal and "adjusted purchase price" means the amount of the consideration for the acquisition (that is the acquisition by the person making the disposal), both adjusted, where the nominal amount of the securities being disposed of is not one hundred pounds, to represent a price for a nominal amount of one hundred pounds.
(7) If in consequence of a conversion on their redemption date of securities of one of the descriptions in the said Schedule any securities of that description and a new holding of Government securities are, under paragraph 10(2) of Schedule 9 to the Finance Act 1962 as applied by paragraph 11 of that Schedule, to be treated as the same asset acquired as the converted securities were acquired, and the adjusted purchase price of the converted securities is less than one hundred pounds then, in computing the gain accruing on an acquisition and disposal of the new holding, or any part of the new holding, there shall be added to the amount of the expenditure which is allowable as a deduction the amount of the gain which would have been exempted by virtue of the last foregoing subsection if the converted securities, or as the case may be the corresponding part of them, had been disposed of at the time of their redemption for a consideration equal to their nominal value.
The Amendment and the related ones, together with the new Schedule, give effect to the concession relating to gilt-edged stocks issued before Budget day which my right hon. Friend announced during the Committee stage debate on 26th May. The first Amendment relates to the short-term gains tax. Amendments Nos. 57 and 95 relate to the long-term Capital Gains Tax, and Amendment No. 118, which is the new Schedule, is common to both of them. When my right hon. Friend announced this concession he referred to the difference between the price of issue of a Government or Government-guaranteed stock and its redemption price and he said that that difference should not be subject to Capital Gains Tax.
My right hon. Friend's words were:
The concession, therefore, that I propose to recommend to the Committee will apply to past issues made at a price below par of British Government or Government-guaranteed dated stocks. It would not extend to issues after Budget day.—[OFFICIAL REPORT, 26th May, 1965; Vol. 713, c. 761.]
Essentially, therefore, the concession contained here is a simple one.
Where stocks were issued at a discount before Budget day—and the relevant stocks are set out in the new Schedule


which we are now discussing—there will be what I could perhaps call a neutral zone, or what the Amendment describes as an exempt price range, within which gains will not be chargeable, and the corollary of that is that losses will not be allowable. The exempt price range is essentially the difference between the issue price of the stock and its redemption price. Gains between those two points will be outside the scope of Capital Gains Tax and of the short-term tax. For example, if a person bought a stock at issue at 95 and sold it on redemption at 100 he is not to be charged a Capital Gains Tax for the gain of five, because that five is wholly within the exempt price range.
Problems of overlapping are dealt with in the Amendments in the way described when the concession was referred to earlier. I could detail that to the House, but I think that the Amendment speaks for itself and there is a reference in the concluding paragraph of subsection (6) of Amendment No. 13 to the adjusted sale price and the adjusted purchase price. This is necessary because a Government security can be bought and sold in amounts of any size and purely as a matter of mechanics it is necessary to operate a concession to provide an adjustment to a £100 unit to which the figures in the Schedule would apply.
The only further point is the situation where the stock is not redeemed but is converted and where one has a conversion of this kind in the ordinary way the tax is deferred until the sale of the conversion stock which is issued to replace the original one. Where one has the sale of stock which is included in the Schedule the tax-free element is added on to the notional stock price of the second stock so that the profit, if any, on the second stock is reduced thereby. Therefore, full effect to the principles of both postponement and the tax-free element is given.
I think that I have dealt with the main purposes of the Amendment. The background is well-known to the House. The principle is well-known, and the Government have accepted what has been pleaded on many occasions in the House and outside that there was an implicit Government promise that where a stock was issued at a given figure with a redemption at a higher figure that was

to be tax-free because the price had been calculated accordingly. My right hon. Friend felt that this was a claim which he did not fully accept but that the British Government ought to be fully, if I may say so, on the far side of honourable in their treatment of stockholders and those buying Government funds and, therefore, ought to meet the point even though it was not fully established and allow this part of any profit made by holders of Government gilt-edged to be tax-free.
I think that it would probably be more convenient to the House if I were to listen to arguments advanced on Amendment No. 282 before attempting to reply to them. I hope that I shall have the leave of the House to speak again should that be necessary.

Mr. Birch: The right hon. Gentleman the Chief Secretary has blushingly received almost as many bouquets as Mme. Callas on a bad night. Obviously, we cannot vote against any reduction in taxation—that would be a very wrong thing to do—but I can award the right hon. Gentleman no marks whatever. I award him minus 5 or omega minus.
The Government's argument is really the "housemaid's baby" argument in extremely elaborate form. I am sure that the right hon. Gentleman is familiar with that argument. The unfortunate housemaid who had had an illegitimate baby said, "After all, it is only a little one". It has never been held by the sterner moralists that her excuse was in any way convincing. What the Government have done is not at all what anyone wanted them to do. They say, "We admit we have acted dishonourably, but we shall endeavour to mitigate the dishonour by acting in this way. We shall exempt some gilt-edged securities wholly from Capital Gains Tax. Some of them we shall tax in full. Some of them will be spotted dogs, bits of them being taxed and bits not". I do not imagine that one would have any sympathy for a housemaid who put up that argument, and I have no sympathy whatever for the Government. They have acted dishonourably, and this makes it worse.
May I illustrate some of the nonsense which will occur? Take two stocks issued at the same price on exactly the same day,


Transport 3 per cent. 1968–73 and Electricity 3 per cent. 1968–73. The Electricity Stock is subject in full to Capital Gains Tax, but the Transport Stock, owing to the accident that a small amount of it was subsequently issued at 73⅛, is not subject to Capital Gains Tax at all. For a great many years these two stocks have been dealt in completely interchangeably. The security was the same, the rate of interest was the same, the date was the same. They were regarded as being exactly the same. Who could conceivably have thought that something would suddenly alter this? It is really quite dishonest.
The Government's argument appears to be that the nominal issue price of a stock is the price which is relevant. But this is not so. Except in a few cases of very short-dated bonds, it is the rarest thing in the world for any Government stock to be subscribed on the day. In fact, the issue department of the Bank of England takes the stocks into its holding and peddles them out gradually, as the occasion arises. There are a few cases of stocks sold at over the issue price, but the vast majority, certainly at the present time, have been sold at well under the nominal issue price. For example, Funding 3½ per cent. 1999–2004 was sold by the Government at down to 17 points below the nominal issue price. Here, the Government were selling a stock 17 points below the nominal issue price, but they intend to mulct the whole 17 points from any person who bought at that price. He never would have bought at that price if he had had the slightest idea that this tax would be imposed. As I said before, this is retrospection in its most odious form.
5.45 p.m.
Let us consider some of the other things which are happening to the market as a result of the tax. We were told that one of the objects of the Finance Bill was simplification. One of the reasons why people hold gilt-edged securities is simplicity. One can deal in them simply. One would know that one was about, one would know what the rate of interest was, when the stock would be redeemed, at what price, and so on. Now, a person wanting to buy or sell a gilt-edged security has to work out permutations and combinations of extraordinary complexity.

He has to take account of the market price first, then the book value at which he originally acquired the stock; then he has to bear in mind the original issue price of the stock. He has to take account of the redemption price and of the price on Budget day.
It is very difficult to work out all these things. Even a man of the intellectual capacity of the Minister of Technology would have great difficulty working them out, and even if he got the right answer it still would not help very much. One may have to sell stock for business reasons at any time during its passage towards redemption date, and no one can really know where he is unless he knows whether the conversion stock which will be offered when the stock becomes redeemable is one which is suitable for him to hold or one issued at the right price. He knows that he can take cash but he will be mulcted of tax, but he does not know, if he takes conversion stock, whether the conversion stock will be worth the price at which it is offered to him. So, however clever he is, there is really no way of knowing where he stands.
It would be something if someone was happy about this, and one might have hoped that Mr. Kaldor would be happy about it. But he is not, because the whole point of his paper in the Minority Report of the Royal Commission was that there ought to be Capital Gains Tax on redeemable Government securities because otherwise Surtax payers might make some tax-free profit, a horrible possibility, in his view. But under this provision they can still make a tax-free capital profit. If they take Transport 3 per cent. stock they have a completely free run. I was told the other day that the Hugarian Ambassador told a friend of mine that there were some good economists in Hungary. I have been wondering whether some au pair arrangement could possibly be come to.
The damage done by what the Government are doing is considerable, and one can see it already. It was all predicted in our last debate. We have had two issues simultaneously of Government securities, both very short, both issued at 100 and both carrying interest at 6½ per cent., an unprecedently high rate. We predicted that if this were done


one would have to have a very high coupon rate, one would have to issue at par, and one would have to give a conversion offer as well as a cash offer. All these things have duly had to be done, and it has been pretty damaging to the market. Though the Bank rate unexpectedly was suddenly reduced by a full 1 per cent., at the long end of the market it has made no difference at all. There has been absolutely no recovery of any sort.
The market, apart from being burdened by the provisions of the Capital Gains Tax, is also burdened by the effect of Corporation Tax, because it means that it is very difficult and expensive for companies to finance themselves other than by debenture issues. I predicted when we last debated this that though a flood of debenture issues had not yet started, it would start, and it has, in fact, now started. A large number are being made at high coupon rates—7¼, 7½ and so on—with good security. These are directly competitive with the gilt-edged market.
One of the reasons why in former times people were willing to take an appreciably lower rate of interest on Government securities than on debentures was the plus value they incurred through the ability to switch because of the very high marketability of the securities and the fact that in the long run they could probably improve their position slightly by switching from one security to another. So one had fluidity of the market, which was more attractive for the holding of these stocks.
The effect of Capital Gains Tax applied in this capricious way means that switching will be immensely cut down. In fact, no institution can afford to sell stock until it reaches its book price. Most of the stock is locked in. So the turnover at the long end of the gilt-edged market has gone down by 50 per cent., and it is likely to go down a good deal more.
All these things are important, because the Government have to raise a great deal of money. I think that £743 million is the correct figure of their real borrowing requirement, and there are £1,700 million of maturities, and since Budget day the potential deficit has been swollen not only by the very large wage increases

in the public sector but by things which I think are absolutely ghastly, like subsidising London Transport and granting a £32 million above-the-line subsidy to the National Coal Board.
That money has to be printed. I suppose it is another victory by the First Secretary over the Chancellor of the Exchequer. But how anyone who took the preservation of the £ seriously could stand for that I do not know. At the moment the Government are managing the gilt-edged market for one reason only, that they are not having to raise any very large sums of money either by Treasury Bills or through the market because, as the Chief Secretary knows, we get the money by borrowing from the I.M.F., by the sale of our reserves and by printing notes, which we are doing on a very large scale. They were very prophetic words by Mr. Cecil Harmsworth King on joining the Court of the Bank of England. He said, "I think that my knowledge of printing should be of great value to the Court." It is.
But the Government have to sell sooner or later. Let us suppose that the £ does recover. We shall have to borrow on a very large scale if we are to contain inflation. I do not believe that the Government will ever get the market right if they put this Capital Gains Tax on it. They will never get the fluidity of the market. I ask the Chief Secretary to consider why anyone should buy gilt-edged securities at the moment. It is not as if they were having a good time. They are not having too good a time. The cost of living will rise. It is very likely that interest rates will rise further. In other countries, it is possible to have different treatment for taxation on Government and municipal securities from that meted out to other people. The Chief Secretary will know that many municipal bonds in America are free from Income Tax. I believe that the Government would be very wise indeed to accept our Amendment. I believe that honour demands it. I do not believe this business of the "spotted dog" arrangement, doing the right thing by one stock and the wrong thing by most of the stocks. I do not see how that can be held to redeem the honour of the Government. Their honour and their interest are involved.
If the gilt-edged market goes on like this, the whole of our financial system will


become gradually unmanageable. Now we are left in the position where the only real operator in the market is the Government through the Government broker. That is a most dangerous position to be in. I hope that even now the Government will think again and appreciate that they have made a mistake and that they have not earned more than minus 5 marks.

Mr. Diamond: There is difficulty in replying to the right hon. Member for Flint, West (Mr. Birch), if I may do so by leave of the House, because he did not address himself at great length to the Amendment in the names of his right hon. Friends and himself as to freeing Government securities as a whole.
The right hon. Gentleman disliked the "spotted dog" arrangement, and went on to criticise a number of things connected with Government financial policy and I do not wish to reply to those remarks and widen the debate in that way. I can only say with regard to what the Government have done that it was precisely asked for by a number of persons in and outside the House. We have debated the matter—

Mr. Birch: Nobody asked for this dotty arrangement. No one conceives that anyone would be such a fool.

Mr. Diamond: If the right hon. Gentleman will look at the debate that we had last time he will see the exact references that I quoted in HANSARD where it was asked for. My right hon. Friend felt that this was in response to a request which was reasonably made. If the right hon. Gentleman wants now to go into a debate exactly similar to the one that we had last time, I can only refer him to the remarks of my right hon. Friend in the OFFICIAL REPORT of 26th May, where he said:
I will address my remarks to the general proposition that some of the gains in gilt-edged transactions should be exempt from tax. That proposition is open to the basic objection that to exempt one large class of gains would drive a coach and horses through the tax. I do not think that the exemption could stop … at the Government-issued and Government guaranteed stocks. The claims of Commonwealth and Colonial stocks would be pressed as well as those of local authorities. There are even advocates of exemption for gains realised on all fixed-interest securities."—[OFFICIAL REPORT, 26th May, 1965; Vol. 713, c. 759.]

Mr. Birch: The right hon. Gentleman will notice that the Chancellor has done exactly that. He has given certain concessions on gilt-edged securities but not on colonial or municipal stocks. So I do not think the right hon. Gentleman can argue like that.

Mr. Diamond: My right hon. Friend was saying in regard to the general exemption of stocks that it would not have been possible to hold it at any particular line, and it would have had to go all the way through to fixed-interest stocks. But there is no question of including fixed-interest stocks or, indeed, colonial stocks in the concession which my right hon. Friend granted, because there could not possibly be held to have been a promise between the Government as issuer of the stock and the purchaser of the stock on the prospectus which was issued at that time that the balance between the issued price and the redemption price would be one which was free of any new tax which might be raised.
6.0 p.m.
In what the right hon. Gentleman has said he has directed his remarks not to Capital Gains Tax but purely to the taxation of gilt-edged stock. Every argument that he used would have been used with equal force when gilt-edged stock was first issued and was subjected to Income Tax. We have had all these arguments before. As the principle on which my right hon. Friend is relying has been adumbrated by no less a person than Mr. Gladstone, perhaps I could quote quite shortly the debate which took place on 25th April, 1884, in col. 686 of HANSARD. Mr. Gladstone said:
Has the right hon. Gentleman considered the conditions under which this country contracted its loans? When it contracted those loans it gave the most solemn pledge to those who lent money that their money should not be made the subject of taxation.
Mr. Hubbard intervened to say:
Quite so. How have you taxed it?
Mr. Gladstone replied:
How has Mr. Pitt and how has Sir Robert Peel dealt with that? By this doctrine, that they laid the tax equally on every subject without reference to the sources from which the income was derived. It has been in that way and in that way alone that those great men believed they maintained the public faith.
And we believe exactly the same thing.

Mr. Box: This Amendment implements the statement which the Chancellor of the Exchequer made at a rather late hour on 26th May, which, as we all know to our cost, was followed by the rather disastrous and certainly momentous events which resulted in the gilt-edged market being closed for several hours on the following day for the first time within living memory. There is no doubt that the repercussions of that closure would have been far greater if it had not by accident coincided with a holiday on the international bourses of the world.
My complaint is that the Chancellor's method of helping some sections of the gilt-edged market to be free of Capital Gains Tax is unnecessarily complicated. It seems to me that to have a neutral zone which is free of tax, and yet other prices which are outside that neutral zone are subject either to capital gains or capital losses, makes the position unnecessarily complicated. The right hon. Gentleman the Chancellor told us during his speech on 26th May:
It would not be a sensible policy unduly to damage it"—
he was referring to the gilt-edged market—
or indeed to damage it at all. One should try to build it up."—[OFFICIAL REPORT, 26th May, 1965; Vol. 713, c. 758.]
Quite honestly, this is a very poor way of trying to build up the gilt-edged market at present.
My right hon. Friend the Member for Flint, West (Mr. Birch) referred to two stocks which are affected, 3 per cent. Transport 1968–73, and 3 per cent. Electricity 1968–73. As he told us, the prices of those two stocks were almost identical before the announcement by the Chancellor. The following day, as a result of what the Chancellor said on 26th May, 3 per cent. Transport 1968–73 immediately appreciated to a figure of 81, a rise of 3⅛ per cent., whereas 3 per cent. Electricity 1968–73 rose very slightly to 78¼, and the prices of those two stocks, up to yesterday at any rate, were only very slightly higher than they were on 27th May, despite the fact that Bank Rate has been reduced by a full 1 per cent. So it is not apparent that the measures announced by the right hon. Gentleman have been very successful in helping the gilt-edged market to any material degree

so far. Perhaps we might have expected a bigger gap between these two stocks as a result of the proposals of the Chancellor, but it seems by the narrow margin—it is something under three points—between the two at the present time that the vast majority of investors in the country were not over-impressed with the Chancellor's attempts to help the gilt-edged market.
We feel that this Amendment, put forward by the Government is a grudging concession, one which the Chancellor is putting forward because he felt he was obliged to because he and the Government were being accused of committing an act of bad faith against investors in gilt-edged securities.
Many investors, I think, would believe that it is not wise to purchase stock which is going to be free of tax under the Chancellor's proposals, because the redemption date is far enough ahead to offer considerable scope for a change to some sensible Government by that time. The one and only way to improve the market in gilt-edged stocks at present is to make them relatively more attractive than other stocks, like the debenture stocks to which my right hon. Friend referred. It therefore seems that the wise move by the Government would be to accept our Amendment, which we are discussing in conjunction with theirs, because if it were accepted then there would be no doubt that we would greatly increase the attraction of Government stocks in relation to other stocks in the market. This, I think, would make the funding, which we know is required, a very much easier matter for the Government.
I urge the Chief Secretary to give the closest possible consideration, even at this late stage, to changing his mind.

Mr. Geoffrey Lloyd: I rise only to make a brief comment, not because I have any special expert knowledge of the gilt-edge market, for I have not, but because everybody in this House and in the country attaches the greatest importance to British Government credit. I do so also as somebody who has listened throughout all the debates on the Finance Bill, and I say that I have never heard the Chief Secretary less happy either in Committee, or so far on Report, than he has been this afternoon. My right


hon. Friend the Member for Flint, West (Mr. Birch) clearly spoke with great knowledge and great authority, and we have had a quite pathetic reply from the Chief Secretary. He did not attempt to deal with the question of the damage which has actually been inflicted by the Government's proposals on the gilt-edged market. I say that it is an unhappy day for British credit.

Mr. Peter Walker: I would certainly support the view which has been expressed by my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) as to the manner in which the Chief Secretary replied to this very important debate. One would have thought that the Chief Secretary would have had in mind the very serious problems the Government must be facing concerning the gilt-edged market, and one would have expected from him a careful, reasoned reply to the views expressed by my right hon. Friend the Member for Flint, West (Mr. Birch). Instead, the arguments propounded by my right hon. Friend were dismissed as not being arguments upon the Amendment; they were dismissed as being arguments on the general economic situation. In view of this, I intend to repeat, if I may, some of the questions raised by my right hon. Friend. I am quite certain that the House will give permission for the Chief Secretary, who, obviously, missed these points when they were last made, to get up and reply to them, because this is a matter of such seriousness and such importance to our economy that really the Chief Secretary cannot be allowed to reply to this debate in the manner in which he decided to do it.
First of all, my right hon. Friend raised quite clearly the point that the Government have discriminated in the manner of their concession, and they have not fully met the argument of meeting the Government's obligations. They have met them so far as some stocks are concerned and they have not met them so far as others are concerned, and it is really impossible, purely on the ground of the obligation of the Government to meet the understanding they had with those people who purchased stocks, to say that the Amendment fully meets this point.
The right hon. Gentleman did not deal with the question asked by my right hon.

Friend, namely, are those stocks first retained by the Issue Department of the Bank of England, and thereafter issued through the Government Broker? The right hon. Gentleman did not comment on that.
Next, my right hon. Friend raised the point about the working of this market depending on it being a simple market in which people are able to invest. The Chief Secretary must be aware that his Amendment will complicate the market. He must be aware that many people who previously invested in this market will now hesitate to do so because of the complications introduced by the Amendment. This matter, too, was completely ignored by the right hon. Gentleman.
The general economics of the situation, which for some remarkable reason were dismissed by the Chief Secretary as being almost dissociated from this debate, are fundamental to it. The Government are in a position where they will have to borrow considerable sums of money. The gilt-edged market is very unhappy as a result of Government action. The Government are faced with the situation that the main investors in the long end of the market, the life offices and superannuation funds, will be handicapped by the Government refusing to allow any form of switching other than switching subject to Corporation Gains Tax. For all these reasons, the gilt-edged market is in a position in which it will find great difficulty in continuing with any firmness at all.
My right hon. Friend also made the point that the Government's policy will result in a considerable number of debenture stocks being issued in competition with the gilt-edged market, once more attracting money away from that market and further weakening it. The Chief Secretary had the audacity to dismiss the whole argument in five minutes without dealing with any of these vital points. He quoted as his one authority in defence of his action what Mr. Gladstone said in the 19th century. There was one other happening in the 19th century similar to what has happened under this Government, and that was the closing of the gilt-edged market. In that case it was due to the Battle of Waterloo.
Gladstone's authority is hardly appropriate to this argument. His policies did


not require so much Government borrowing. The National Debt was of rather different proportions in his time, and although Mr. Gladstone introduced a lot of things of which I would not have approved, he did not introduce a Capital Gains Tax further to distort the market. I think that the House must demand of the Chief Secretary a much more detailed reply than we have so far received to the many points made by my right hon. Friend.

Mr. Diamond: With your leave, Mr. Speaker, and that of the House, I am ready to respond shortly and deal with the three points by demonstrating that they have already been answered.
The first point is that the Government have not met their full obligations. This was dealt with fully in the previous debate. A distinction is drawn between stocks issued under a prospectus, and stocks bought as it were off the shelf. I made the point that the Government could not accept that they were in any sense honour bound to those who had bought off the shelf. We cannot have regard to the terms of a bargain between a buyer and a seller in the way that we have regard to the prospectus of issue by a public company.
I underlined my argument by drawing attention to stock which had been sold by the middle man. That stock had not been sold on a prospectus, but was sold down to 17 points below the nominal prospectus price. I have no doubt that it was sold at various stages down to 17 points. I made it clear that this was not a transaction between the Government and the investor, the purchase of the stock. This was a transaction in which people were buying off the shelf at the market price at the time, and therefore the Government did not feel themselves in any sense honour bound at that point.

6.15 p.m.

Mr. Birch: It is all very well talking about buying off the shelf, but who put the goods on the shelf? The answer is the Government. They never would have been sold at the price they were sold at if anyone had the faintest idea that a Capital Gains Tax would be imposed on them. The argument is the same as that for stock sold on a prospectus. There is no moral difference of any sort.

Mr. Diamond: The right hon. Gentleman says that the argument is the same, but I deny that. When a company goes to the market, a prospectus is issued, and on the precise terms of that prospectus people subscribe to the shares. There is a bargain between those who sign the prospectus, the directors and so on, and the purchasers of the shares. The shares are then quoted, and people buy them on the Stock Exchange. They are then not dealing with them according to the original bargain. The bargain is no longer between the issuing house, or those who issued the prospectus, and the purchasers, and it is the same in this case. As the right hon. Gentleman made it clear, here was a stock quoted at various prices going below the issue price. It went to 17 points below. This might be an argument for freeing all Government stocks from Capital Gains Tax, but that is a separate argument.
It was then said that there was an advantage in having simplicity in the market, and that Capital Gains Tax would introduce complications. It was never as simple as all that. It has always been argued that it was simple, but the fact is that the return had to take into account a basic unalterable standard rate of Income Tax, and, secondly, a standard rate of Surtax or Supertax in terms of the owner. Both these things had to be taken into account to find out the return to the owner, and they still have to be. It was not a simple straightforward argument before, and it is not now. These matters have to be taken into account, and the further matters which have to be taken into account are of negligible complexity by comparison with those which have always had to be considered, and this was dealt with in our previous debate.

Mr. Peter Walker: Would not the right hon. Gentleman agree that the biggest investors in the long end of the market are the life offices who pay a fixed rate of Income Tax, agreed to by the Government?

Mr. Diamond: That illustrates my point. They had a fixed rate because, if they did not, as tax went up their calculations would have been falsified. Therefore, one has to take into account the rate of tax. The life offices found


themselves incapable of continuing when the tax exceeded a certain figure, and the Government of the day therefore agreed a maximum figure. That is how one gets this relationship between the Government and life insurance offices.
I was then asked why I did not deal with all the points raised by the right hon. Gentleman in relation to the operation of the gilt-edged market generally. This was fully dealt with in our previous debate. The answer is that we want to help the gilt-edged market. We want to help it a little more helpfully than the speech of the right hon. Gentleman. I should have thought that his was not a classic of speeches in aid of the gilt-edged market. The difficulty is that when anybody stands at this Box and answers a debate, as happened after the last debate, the right hon. Gentleman says, "How dare you say nasty things like that?". We are trying to get a Finance Bill through the House of Commons. We are expected to take everything that comes at us, and give nothing in return.
To those who are not satisfied with the fullness of my reply I say, "Read the debate that we had on this identical topic, and you will find the full reply there". Shortly, the position is that we are anxious to help the gilt-edged market, but it does not follow that the only way to help it is to pick a particular new tax and say that it shall apply to everybody, but shall not apply to owners of gilt-edged stock.
That is not the way to help the gilt-edged market. It is the way to break faith with the public and, in identical circumstances, Mr. Pitt, Sir Robert Peel and Mr. Gladstone all relied upon the same principle as that which I am relying upon, and which I thought would have had some weight in this House. It is in that way alone that those great men believed that they maintained the public faith, and we are continuing to do that.

Amendment agreed to.

Mr. MacDermot: I beg to move Amendment No. 147, in page 12, line 18, at the end to insert:
in Section 12(5) of that Act (persons acting as nominees, etc.) for the words '(or for two or more persons jointly so entitled)' there shall be substituted the words 'or for another person who would be so entitled but for being an infant or other person under disability (or for two or more persons who are or would be

jointly so entitled)' and in the proviso to Section 12(6) of that Act (residence of trustees) for the words 'body corporate' there shall be substituted the word 'person'".

Mr. Speaker: It might be convenient if, with this Amendment, the House discussed Amendments Nos. 148 and 149. I do not know whether that would be acceptable.

Mr. Heath: That is quite agreeable to the Opposition, Mr. Speaker.

Mr. MacDermot: We shall be very content with that, Mr. Speaker. I am obliged to the right hon. Member for Bexley (Mr. Heath).
The Amendment raises a somewhat technical point. It deals with the short-term effect of the Capital Gains Tax on this point, while the other two Amendments deal with the long-term effect. Section 12(5) of the Finance Act, 1962, provides that an infant or other person under a disability who would be absolutely entitled to property as against trustees but for this legal disability should be treated as if he were absolutely entitled for the purposes of the tax. The House will remember that in the case of trust property generally the liability for Capital Gains Tax rests on the trustees, and that there is no looking beyond them to the beneficiaries. That rule does not apply where trustees hold property for persons absolutely entitled to it as against the trustees. The reality of the situation is that the trustee is little more than a nominee, holding on behalf of the beneficiaries.
In representations that we have received, especially from the Landowners' Association—and I was surprised to find it raising such a technical point; it is a very good one—we have had our attention drawn to the fact that in the case of a trust for a widowed mother, with the remainder going to her son absolutely, if the mother dies while the son is under 21 the infant would not be absolutely entitled, as against the trustees. In that situation it clearly would be unfair if, as a result of that somewhat artificial legal position, there were to be one charge to capital gains when the widow died and the life interest came to an end, and another charge when the son attained the age of 21 and thereby became beneficially entitled, as against the trustees.
The proper course is to make it clear beyond all doubt that the mere fact of infancy does not prevent a person being regarded as absolutely entitled if the trusts of a settlement are at an end. The same arguments can be applied to persons of unsound mind who succeed to property on the termination of a prior interest. The Amendment is, therefore, couched in general terms, to cover all forms of legal disability. The real importance arises in relation to the long-term tax, but it is clearly appropriate to make some Amendment in respect of the short-term tax.

Mr. Scott-Hopkins: I am grateful to the Financial Secretary for bringing the Amendment forward. This is the case of a trustee of an estate, where, under the existing Capital Gains Tax legislation, a considerable degree of hardship could be incurred by a minor. As I understand from what the Financial Secretary has said, this liability will now be removed. I was a little foxed by the word "infant". I was not certain of its meaning, and whether it included a minor under the age of 21.

Mr. MacDermot: Mr. MacDermot indicated assent.

Mr. Scott-Hopkins: That takes another worry from my mind. As I understand it, there could be an assessment after each 10 years in respect of the trustees, where the minor is entitled absolutely later on. I should like to know whether these provisions exclude that necessarily having to be done. Further, when the minor inherits absolutely at the end of the trust period, will there have to be an assessment at that time? I understand that these Amendments would obviate that.

Mr. MacDermot: Mr. MacDermot indicated assent.

Mr. Scott-Hopkins: Do I take it that this is so?

Mr. MacDermot: I did not quite follow the hon. Member's point about the 10-year period. In future it will be a 15-year period which is the minimum period which must elapse before there can be a second charge to tax upon the trustees. That situation is not affected by the Amendment.
On the other points—in law an infant is a person up to the age of 21, and the

effect of the Amendment is that once the infant is the sole person entitled, and the settlement is therefore at an end, there will not be a second charge when he comes of age and is entitled to have the moneys paid over to him.

Mr. Scott-Hopkins: I am grateful to the Financial Secretary for intervening. He has answered the points that were raised in Committee, which caused a great deal of anxiety, especially as to the position of trustees and minors.

Amendment agreed to.

Mr. MacDermot: I beg to move Amendment No. 312, in page 12, line 42, at the end to insert:
(f) at the beginning of paragraph 20(4) (definition of connected persons) there shall be inserted the words "Except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements".

Mr. Speaker: I wonder if it will be for the convenience of the House to consider at the same time Amendment No. 276.

Mr. MacDermot: Yes, Mr. Speaker. They both raise exactly the same point. The Amendment has been put down as a result of our making a take-over bid for Amendment No. 276. This point was raised by the hon. Member for Crosby (Mr. Graham Page) and we think that the Amendment is worth making. Under the 1962 Finance Act connected persons are so defined as to include partners, a husband or wife, or relatives of a partner. That definition has been imported into the Bill through the provisions of the Seventh Schedule.
For the purpose of Capital Gains Tax transactions between connected persons are treated as transactions which take place otherwise than by a bargain at arm's length. In consequence, when an asset is disposed of between such persons it is deemed to be transferred at market value. This is a necessary anti-avoidance provision, but its application has given rise to considerable worry among certain professional bodies, in which it is now a practice that when a firm takes in a new partner it does not require him to pay for the full value of his share of the partnership, and particularly of the goodwill in the partnership.
6.30 p.m.
In these circumstances, it was pointed out, it would be harsh to charge Capital Gains Tax on a notional sum which was not related to something which was a genuine commercial transaction. I would make it clear that it has always been the intention of the Revenue to interpret these provisions in such a way as to give effect to and to follow actual commercial arrangements between the members of the partnership. This is an anti-avoidance provision and would not be intended to interfere with proper commercial operations. The hon. Member for Crosby put down an Amendment to the Seventh Schedule which would write into the Bill this rule, in reference to which the Revenue would, in practice, have governed itself, beginning with this kind of case. We find the Amendment perfectly acceptable. It will help to reassure the bodies concerned. In consequence, we have also put down the Amendment to Clause 16.

Mr. Peter Walker: I am grateful to the Financial Secretary for this Amendment. I am pleased that my hon. Friend the Member for Crosby (Mr. Graham Page) originally raised it. People will always prefer to see matters like this as part of the Bill instead of left to the discretion of the Revenue. As a result of that, people sometimes receive advice which, although in practice it turns out to be wrong, in theory is correct. I think that it was right to make this part of the Bill.

Amendment agreed to.

Mr. MacDermot: I beg to move Amendment No. 15, in page 13, line 3, at the beginning to insert "The foregoing provisions of".

Mr. Speaker: Perhaps it would be for the convenience of the House to discuss with this Amendment the next one, No. 16.

Mr. MacDermot: I think that that would be convenient, Mr. Speaker.
These two Amendments have been put down in response to a request that I should look further into the question of the disposals of land acquired before Budget day and disposed of more than 12 months and less than three years after

the acquisition. This question was raised by the hon. Member for Barkston Ash (Mr. Alison) in Committee. It arises, of course—with the alteration which we have made of the Bill—as a result of the period affecting land for which land may be held in order to escape liability to the short-term tax. Previously it was three years in future it will be 12 months.
The question which arose was what should be done in the case of people who have bought land before Budget day and, at the time they bought it, knew that they would have to hold it for three years if they were to dispose of it without incurring a liability to the short-term gains tax. Should they continue to be governed by the old Act, or should they enjoy the benefit of the new provisions? Clearly, there are here three classes of land which was bought before Budget day. First would be land bought before Budget day and sold within 12 months. Clearly, that remains still liable to both Income Tax and, if applicable, Surtax, as a short-term gain. At the other end, there is the case where the land bought before Budget day is not sold until after three years. That escapes the short-term tax and the liability there, under the new provisions, is to the long-term Capital Gains Tax on the gain since Budget day.
The problem arises with the intermediate class, that is to say, land sold between one and three years after the acquisition. As I have pointed out, as the old law stood, at the time of acquisition the purchaser knew that he would be liable to a short-term tax. It was for that reason that we proposed in the Bill that he should remain liable in the same way as in all cases of property other than land, where he could dispose of it after six months, and escape liability to the short-term tax. We have allowed that position to stand and did not seek to apply to him the longer period of 12 months. It was argued that the provisions affecting land would be unfair compared with post-Budget day acquisitions, which would pay only at the long-term rate if disposed of after 12 months. It was also argued that it would artificially lead to such land being held back from the market. I find that argument not very persuasive, because it was the 1962 Act which achieved this result, and not anything in the Bill.
However, on reflection, we agreed that it would be fair to grant some concession here. We did not think that it should be done by exempting all pre-Budget day gains on which the owner fully expected to pay tax at the short-term rate if he disposed of it within three years. We propose in these Amendments that he should be liable by making the whole of the gain taxable, but taxable at the long-term rate of 30 per cent. or, if he can take advantage of it, on the alternative basis of charge. In this way, he benefits and is put in the same position in relation to his holding as someone would be who was to acquire land now and sell it between one and three years after acquisition.

Mr. Michael Alison: I am very grateful to the Financial Secretary for going over the arguments which were used at that time for making this concession, which will be greatly welcomed by a number of people who have been caught, quite fortuitously, by the new provisions introduced in the Bill. As he said, the substance has now been granted in this respect, in that categories of persons who acquired land before the Budget and after it are now treated in a uniform way. We are very grateful to him for that.

Mr. Peter Walker: I should like to add my thanks to the Financial Secretary for acceding to this. This is another case of this side of the House having improved the Bill. I should like particularly to congratulate my hon. Friend the Member for Barkston Ash (Mr. Alison). On reference to the earlier debate, I find that the Financial Secretary paid tribute to the logical and cogent way in which this was argued. One saw that respect for the arguments of my hon. Friend when, during the debate in Committee, he used such phrases as, "Therefore, although this is a reasonable point … although … perhaps … just on balance …" and other similar arguments. When one sees a Treasury Minister happily wobbling in this way, one always has hopes that, by the time Report is reached, the Government will have been converted to sensible arguments like those propounded by my hon. Friend. Certainly, in this case these arguments have

been respected and the Bill has been improved in this way.

Amendment agreed to.

Further Amendment made: In page 13, line 9, at end insert:
(12) Income tax shall not be charged by virtue of section 10 of the Finance Act 1962 in respect of an acquisition and disposal of land where—

(a) either the acquisition or the disposal, whichever is the earlier, occurs on or before 6th April, 1965, but the disposal or acquisition, whichever is the later, occurs after 6th April, 1965, and
(b) the disposal or acquisition, whichever is the later, occurs more than twelve months after the acquisition or disposal (but not more than three years after),

but in the case of a gain of any amount exempted by the foregoing provisions of this subsection, the gain shall be treated for the purposes of Part III of this Act as if it were a chargeable gain, as defined in Part III of this Act, and any loss so accruing shall be brought into account accordingly; and for those purposes the question whether any and, if so what, gain or loss so accrues shall accordingly be determined in accordance with the provisions applicable to income tax chargeable under Case VII of Schedule D and not in accordance with the provisions of Part III of this Act.
This subsection shall apply to an option or other right to acquire or dispose of land as it applies to land—[Mr. MacDermot.]

Clause 17.—(AMENDMENTS OF CASE VII OF SCHEDULE D: CHATTELS SOLD FOR £1,000 OR LESS.)

Mr. MacDermot: I beg to move Amendment No. 17, in page 13, line 30, to leave out "forming" and to insert "which have formed".

Mr. Speaker: Perhaps it would be for the convenience of the House if we were to discuss with this Amendments Nos. 18, 19, 20 and, in page 4268, Nos. 64 to 67 inclusive to Clause 29.

Mr. MacDermot: These numerous Amendments deal with a relatively small point. The first three Amendments to Clause 17 provide that the rule about two or more assets forming part of a set of assets is to apply only if the assets form part of a set of articles of any description all owned at one and the same time by one and the same person. This point was raised in Committee. It was never the intention to try to apply the set provision in a case in which the articles had not all been in common ownership, and my hon. and learned


Friend the Solicitor-General undertook in Committee to look at this matter and to see whether provisions could be written, into the Bill to make it clear.
This the Amendments do. The first three Amendments to Clause 29 achieve the same result. The fourth Amendment to each of these Clauses deals with an essentially drafting point to spell out the original intentions and to avoid any possible misinterpretation. They have the effect that if there is a disposal of a right or interest in or over a chattel, for example if a person leases an interest in a chattel which he owns, then the value of what remains undisposed of—the value of the rights which he retains in the chattel—is to be added to the consideration received for the disposal in determining whether the chattel is chargeable on the gain or loss which has emerged from the transaction.
The provisions as they stood have been criticised as being open to a possible misinterpretation so as to result in an undue liability to charge. That was not the intention, and I think that the drafting of these provisions makes it clear that it is solely for the purpose of calculating the true gain that one must have regard to the valuation of all the interests in the chattel.
Amendment agreed to.
Further Amendments made: In page 13, line 31, after "description", insert:
all owned at one time by one person".
In page 13, line 31 leave out "the same"and insert "that".
In page 13, line 43, leave out from "property" to end of line 45 and insert:

(a) in the first instance those subsections shall be applied in relation to the asset as a whole, taking the consideration as including the market value of what remains undisposed of, in addition to the actual consideration,
(b) where the sum of the actual consideration and that market value exceeds one thousand pounds, the limitation on the amount of income tax (including surtax) in subsection (1) shall be to half the difference between that sum and one thousand pounds multiplied by the fraction equal to the actual consideration divided by the said sum, and
(c) where that sum is less than one thousand pounds any loss shall be restricted under subsection (2) of this section by deeming the actual consideration to be the actual consideration plus the said fraction of the difference between the said sum and one thousand pounds.—[Mr. MacDermot.]

Clause 19.—(CAPITAL GAINS TAX.)

6.45 p.m.

Mr. Peter Walker: I beg to move Amendment No. 21, in page 15, line 10, at the end to insert:
less three-tenths of one per cent. for each one per cent. that the Index of Retail Prices, prepared by the Ministry of Labour, has risen in the period between the date that the chargeable asset was acquired and the date at which the disposal of the chargeable asset took place; or, in the event of assets acquired prior to 5th April, 1965, less three-tenths of one per cent. for each one per cent. that the Index of Retail Prices has risen in the period between 5th April, 1965, and the date at which the disposal of the chargeable asset took place".
The Amendment, which stands in the names of my right hon. Friends and myself, is perhaps one of the most important Amendments concerning the Capital Gains Tax provisions of the Bill. It is designed to protect persons from paying tax upon the enhancement of the value of their property resulting from inflation. The House will see that we have endeavoured to relate this to the Ministry of Labour retail price index. Although this is not the most perfect instrument for certain items, it is the only available instrument which could be used to ascertain month by month the degree of inflation which has taken place within the economy.
The Amendment is of particular importance during the present time when we are suffering from considerable inflation in the economy. To give an illustration, in the short time that the Government have been in power there has been a rise in the retail price index of 4 per cent. This means that had there been a Capital Gains Tax of the dimensions suggested in the Bill, and had some person purchased property on the day the Government came into power and disposed of it at the present time, then 4 per cent. of that value would have been subject to Capital Gains Tax, although in terms of purchasing power the realisation of those goods would not have been more satisfactory to the person concerned than had they been sold at the original price on the day of the General Election.
This is very important in many spheres. It is important in terms of the general provisions of the Bill in respect of chattels, for over the decades we have seen the value of many articles increase because of the general inflation. We suggest that


if over a period of 20 or 30 years general inflation is to the extent, for example, of 100 per cent., then it is absurd that if a person disposes of property at the end of that period he should have a deduction of 30 per cent., or whatever is the appropriate rate, from what has been an enhancement only in paper terms and certainly not an enhancement in general purchasing power.
Various formulae are used throughout the world to protect persons, where a Capital Gains Tax has been applied, from the ravages of inflation. Hon. Members opposite frequently quote the economic position in Sweden and the various taxation methods which are used there. In Sweden, where Capital Gains Tax applies, the percentage of the Capital Gains Tax decreases over a period of time. It is true that in Sweden it is not directly related to any inflationary position, but it is generally assumed that over a period of years one can in any case expect an enhancement of value and that it is wrong to tax that enhancement.
I hope that hon. Members on both sides of the House will agree that the purpose of the Capital Gains Tax is to tax those persons who make a genuine profit out of a capital transaction and not, for example, to tax a person who perhaps owns two or three houses for the purpose of obtaining an income. We all know of the example of a widow relying on an income from the rent of two or three houses. We also know that over a period of years the value of those houses has increased. If for some reason, perhaps because of a decision to move to some other part of the country, the widow decided to sell those houses after 20 years, and to buy three identical houses providing a similar rent in another part of the country, it is almost a certainty that there would be a considerable difference in the capital value of her properties between the original date on which they were purchased and the date on which they were sold 30 years later. Yet, in undertaking what in this case is a transfer of assets, that person would have a Capital Gains Tax imposed of 30 per cent., or whatever is the appropriate rate for her, of that transaction.
I would emphasise that the Amendment is important only to the long-term

investor. It is of no importance to the speculator, because the speculator who makes a capital profit over a short time is hardly affected by the provisions of the Amendment.
Surely no hon. Member can argue that a person who, over a period of 30 years, sees the enhancement of a piece of property from £1,000 to £1,500 should be treated in exactly the same way for taxation purposes as a person who receives an enhancement of property from £1,000 to £1,500 over 18 months. But under the Bill the position will be that if a person buys a property in 1965 for £1,000 and sells it 20 years later for £1,500, he will be taxed at exactly the same rate as a person who made a similar transaction 18 months prior to the selling of the property. It means that people who are investing to provide for their retirement—shopkeepers and others who are self-employed, many of whom invest to provide for their later years—would find themselves heavily penalised by the taxation which would be imposed not on any trading transaction which had taken place, but because of inflationary tendencies in the economy.
If the Government are claiming that they are endeavouring to stop inflation—if they now believe that as a result of recent happenings their incomes policy is succeeding—they should admit that the Amendment would not cost them a penny; that is, as long as they believe that their policies can check inflation. The only possible reason for the Government not accepting the Amendment is that they expect inflation to take place during their period in office. I agree that there is every sign that that expectation will be realised. Indeed, they are doing exceedingly well in the first few months of their term of office to see that it is realised. As I say, if they are genuine in their belief that inflation can be checked, the Amendment should appeal to them, particularly since acceptance of it would not cost any money.
The Amendment is drafted to have a direct relationship to inflationary trends and it is concerned particularly with small investors, people who invest in various types of security, such as life assurance. It is well known that one of the ways in which the life offices have appealed to the public over the years is that their with-profit policies provide a hedge against


inflation. The success of their investment policies is such that they are able to pay out, at the end of a 20- or 30-year period, a far greater sum than the premiums paid. It is through these offices that the majority of families make provivision, by means of life assurance, for later years.
Under the Bill as drafted these life funds will be subject to the full blast of the Capital Gains Tax. It may well be that after the new Clause which was accepted last night the Government will decide to reduce the rate of tax on life funds to 30 per cent. That would, to some extent, help to lessen the ravages which the Government's taxation measures will have on life funds.
Many of the investments of life assurance companies are in dated gilt-edged stocks. If inflation took place in the 10 to 20 years prior to the date of redemption of those stocks, the gain would probably be tax-free as a result of the exemption provided by the Amendment, if it is accepted. Its acceptance would, therefore, go some way towards relieving the damage that will be done to the attractiveness of life policies as a result of the imposition of the Capital Gains Tax. I strongly commend the Amendment to the House. It would mean that the tax would apply only to genuine gains and not to artificial gains.

Mr. Terence L. Higgins: I strongly support the Amendment and the remarks of my hon. Friend the Member for Worcester (Mr. Peter Walker) because this is indeed one of the most important Amendments affecting the capital gains aspects of the Bill. I regret that the algebraic formula which was suggested in Committee to make allowance for the effect of inflation was not accepted by the Government. I hope, however, that they will accept the Amendment because it is perfectly clear, from an analytical point of view, that it should be accepted.
In considering this matter hon. Gentlemen opposite have allowed their political prejudicies to overcome their analysis of the problem. There is a genuine difference in analysis between the two sides and it is to this aspect that I will primarily address my remarks. In other words, I will try to persuade impartial hon. and right hon. Members, such as yourself, Mr. Speaker—for if the Opposition do rather

worse than they did last night you may have a casting vote on this matter—of the importance of accepting the Amendment.
When we consider a Capital Gains Tax we must surely consider taxing gains in real terms. It is wrong to tax not only gains in real terms but gains which merely reflect a change in the value of money. I suggest that we must first consider the important fact that the yield which the Government will get from this form of taxation—if the Amendment is not accepted—will depend on the rate of inflation which they allow to happen. This is the crucial point. The Government will collect more in taxation from people who happen to own capital if inflation goes on unchecked than if the Government adopt a responsible attitude and restrict the rate of inflation or attempt to try to halt it.
This is a totally wrong position for any responsible Government to put themselves in. Suppose, as a result in inflation, an asset which was originally worth £100 goes up in money value to £200, then the Government will collect twice as much in taxation as if the rate of inflation had only been such as to increase the money value of the asset to £150. I suggest, therefore, that we must consider the matter in real not money terms. For if we do not amend the Bill in the way suggested by my hon. Friend the tax will be charged not on capital gains but on anyone who happens to own real assets. It is because they will not think in real terms that the analysis of hon. Gentlemen opposite has gone awry.
Secondly, as my hon. Friend the Member for Worcester explained in some detail, it may happen that someone makes a capital gain over a short period, when the value of money has scarcely changed at all—and, say, the value of his assets has gone up from £100 to £120. He will be charged precisely the same tax as someone whose assets have appreciated from £100 to £120 over a much longer period, during which time the value of money has changed considerably. It is surely evident that that is totally unfair because, on the one hand, we have someone who has made a large real increase in the value of his assets and, on the other hand, we have someone who has made a very small increase in the real value of his assets—and the rest simply reflects a change in the value of money. Are


both to be charged the same amount in taxtion? On common-sense grounds it must be inequitable to do so. Indeed, I cannot understand why hon. Gentlemen opposite have adopted the view they have on this matter. Their point of view was clearly expressed in Committee when the Financial Secretary said:
I am referring to spending power as between different sections of the community, judged, in terms of money. If people increase their money incomes, whether they do so in the form of wages or capital gains, they have an increase in spending power."—[OFFICIAL REPORT, 25th May, 1965; Vol. 713, c. 319.]
This is simply not so. In terms of spending power expressed as one must express it—in terms of command over the goods one can get by spending—this is not true. Hon. Gentlemen opposite have extended the principle that one should tax people who happen to make real capital gains to the principle that people should be taxed on their capital whether or not they make real capital gains. That is absurd.
The Financial Secretary got himself tied up when in the Committee stage of the Bill, in column 322, he spoke about the redistributive effects of inflation on various kinds of income receivers. The argument he spelt out then is fairly complicated. He said that people who hold equity shares will gain at the expense of those who hold fixed-income securities, and he also suggests they will gain at the expense of wage earners. The important thing is the timing aspect of this, and I would commend to him certain works of Professor Phelps-Brown, of the London School of Economics. Frequently we may find that wage earners are gaining on those who hold different types of assets. But at other times we may not, and it would be quite wrong for him to pursue the kind of argument we find in column 322 of the OFFICIAL REPORT of 25th May, and suggest, therefore, that we must extend this tax to cover money gains as well as real gains.
7.0 p.m.
Finally, I want to turn to the underlying analysis of this whole question. I can see that hon. Gentlemen on the other side genuinely believe they are right about this, but I want if I may to persuade hon. Gentlemen that the basis of their argument is false.
It is most cogently expressed on page 366 of the Minority Report of the Royal Commission on Taxation of Profits and Income, one of the authors of which was Dr. Kaldor. The argument he sets out in paragraph 37 has a logical fallacy in it, which is fairly unusual in an analytical matter of this kind. His opening words are:
We do not deny that the rise in capital values that occurs in the course of an inflation does not increase the taxable capacity of the recipients in the same way as a rise in capital values during the period of steady prices. But we cannot regard this as a justification for excluding capital gains from taxation within the general framework of a tax system which sets out to tax income and not consumption.
The point I want to make is that the Report says that this is not a reason for not taxing capital gains, but it does not says it is not a reason for not making an allowance for inflation when computing capital gains. I would suggest that in reading this, the hon. Gentlemen opposite, looking at it from their own basic assumptions, have misunderstood what the author of that Minority Report was advocating.
He goes on to say:
If the proceeds of the gain are spent the recipient derives the same benefit as he does in spending taxed income.
That is the crux of the matter. If the value of money changes, as I have already said, the owners of the asset gains nothing in real terms. The gain which he has made is purely a monetary gain and not a real gain. Therefore, I, would suggest it would be wrong to tax him on an increase in money terms. It is not right to say that he should be taxed because all other income receivers are also only gaining in money terms. The person who has the asset in the first place has already paid tax when he acquired that asset, because he has bought it out of taxed income. I see some hesitation on the faces of the hon. Gentlemen opposite. If one has already paid tax before one buys an asset and then it appreciates purely in money terms and not in real terms, it would be wrong for the owner to pay tax again when he uses some part of the value of that asset. Unless the Amendment is accepted, there will be a double taxation. The equitable thing to do would therefore be to make an allowance in computing the capital gain for the effect of inflation.
The argument which has been put forward in paragraph 37 of the Minority Report, which underlies the whole case that has come from the other side, is fallacious, because what the person who liquidates a paper gain on a capital asset is doing is using up part of his asset. It would be much the same to say that if I were to have £100 and I spent £10 out of that, I ought to be taxed on the £10 because I derive the same benefit as someone who spends £10 out of taxed income. That is quite absurd. If we do not accept the Amendment, on this kind of capital gain we shall have both Income Tax on the money used to acquire the asset and an expenditure tax if part of the capital is used to buy something.
I do not think there is a hole in this argument. I believe that the case put forward on behalf of the Government is wrong, and unless we accept the Amendment we shall have, on people who happen to have acquired real assets in an inflationary situation, both a tax when they have acquired money to buy the asset and a tax when they have used part of the asset to buy something else.

Mr. Robert Sheldon: Would not the hon. Gentleman accept that when purchasing his asset, the money with which the asset is purchased is also taxed?

Mr. Higgins: Yes. That is precisely my argument; but he is taxed a second time when he spends it or liquidates what is purely a paper gain.
I am convinced that there should be an allowance made for the effect of inflation in computing capital gains. Unless we do that, what the hon. Gentlemen opposite are saying—and they ought to come out in the open and say it—is that anyone who happens to have an asset and who happens to live in an inflationary society must have part of it taxed away. This has nothing to do with a capital gain at all. This is a wealth tax.

Mr. Joel Barnett: The hon. Gentleman the Member for Worthing (Mr. Higgins) showed his customary logical approach to the subject, but he did not allow himself to go far enough. I cannot allot five marks out of ten to the hon. Gentlemen, unlike the hon. Member for Shipley (Mr. Hirst) when he allotted five out of ten to my

right hon. Friend the Chief Secretary because they have presented a very poor case for their own Amendment. Whether we like it or not, inflation is an economic fact of life, and, of course, one can make political capital out of whichever party happens to be in power at a particular time. But one has to recognise in effecting a reasonable and equitable tax system that the inflationary situation that we have is not made any better by the sneers one hears from hon. Gentlemen opposite at attempts to do something about an incomes and prices policy. Neither is it made any better by the genuine disbelievers who have nothing else to offer than reverting back to the system we have had over the previous thirteen years.

Sir D. Glover: I think that there are very few Members on this side who are members of the Transport and General Workers Union.

Mr. Barnett: The hon. and gallant Gentleman is doing his best, in his usual way, and adds strength to the point I was making. One can make political capital out of one particular Government having during its course of life a certain degree of inflation, but I would have thought that all hon. and right hon. Gentlemen would have a vested interest in seeing that we had an incomes and prices policy that was effective to some degree. However, it may be that I am wrong about that.
I would say to the hon. and right hon. Gentlemen who support this Amendment, why have they never put down an Amendment for the reduction of Income Tax on allow for inflation? The right hon. Gentleman the Member for Bexley (Mr. Heath) shakes his head, but it is equally logical. There is precisely the same logic in that as in the Amendment, and I am afraid the hon. Gentleman the Member for Worthing did not make his case at all. The fact that we tax inflationary increases in income means that it falls much harder on a person with no capital at all. There is no real increase in a wage when that increase is only equal to the amount of inflation, yet we still tax it at the same standard rate or, perhaps, reduced rates of tax.

Mr. Fletcher-Cooke: The hon. Gentleman has said that nothing was done about the Income Tax as it affected an


increase in wages that might have been due to inflation. That is not true. Year after year the personal and other allowances were raised precisely to make sure that the amount of tax extracted was not increased by the factor of inflation. That was done over the last 13 years.

Mr. Barnett: One can give all sorts of reasons now why a particular personal allowance is given. [Interruption.] If hon. Members opposite want to make speeches, let them do so in their own time. I intend to make my own speech now.
To be logical, if one wants to give some assistance to taxpayers who suffer by inflation one should put forward suggestions that will equally affect those who are subject to Income Tax, because their only source of revenue is their income, and the increase in their income. The crux of the matter is that right hon. and hon. Members opposite do not accept our contention that increases in capital should be taxed in precisely the same way as increases in income. If they do not accept that premise, they will find all sorts of methods of trying to alleviate the effects of the Capital Gains Tax—

Mr. Higgins: I thank the hon. Gentleman for giving way, because I know that we are all trying to find the right answer. Would he not agree that if his argument is carried to its logical conclusion we ought to have a Capital Gains Tax on capital and make some allowances on income, but there are people with capital who are also subject to progressive Income Tax on the dividends that are paid? The purpose of the tax is not to adjust inequities due to inflation; that is something the Government should do, for example, with old-age non-pensioners.

Mr. Barnett: I am sure that the hon. Gentleman would want to see as equitable a tax system as possible. Once we accept the basic point that one taxes increases in capital similarly to increases in income, I say that we should have a tax affecting both in a like way. If, as is suggested in the Amendment, we have relief in advance because there might be inflation in the future, then, in equity, we must allow it all round. Hon. Members opposite know that if we were to give relief in this way a given Chancellor in a given year, knowing that he had

certain revenue from Capital Gains Tax or Income Tax, Surtax, or Corporation Tax, and knowing that it was in some way reduced because of the inflationary spiral, all that would happen, assuming one had the same level of Government expenditure, would be that he would slightly increase the standard rate, as it were, to allow for the small amount given as a concession, or he would reduce public expenditure. That cannot be disputed.
I believe that the supporters of the Amendment have put forward a foolish point and a purely political one. The Amendment could be harmful by giving to taxpayers the completely false impression that it would help them. It would do nothing of the sort.

7.15 p.m.

Mr. Hirst: The Government really must be in a jam over this Amendment when we find the hon. Member for Heywood and Royton (Mr. Barnett), who usually argues so closely, setting up so many hares that he does not know what course he is on. When we discussed this point in Committee, I remember being rather cross with the Financial Secretary for giving an idea of the Government's intentions before we had deployed our arguments on the appropriate part of the Bill. I hope that the delay we have so far had will have given him some opportunity to think again, because there is considerable feeling over this question.
I agree that we have had inflation for a long time. In Committee, I went back in that respect to Queen Anne, though I do not propose to do so now. What makes us on this side more careful is that we cannot forget that inflation went on at about 6 per cent. per annum when the Labour Party was in power, fell very considerably when the Conservative Party was in power and is now running at the rate of 8 per cent. a year. If, as every sign indicates, inflation continues at the same rate in the second half of this Government's year as in the first, the result will be a great inroad into the value of assets in money terms.
If, in a few years, an asset worth £1,000 is reduced to an effective £400, it means that the Government are not only embarking on a policy of capital gains but are, on top, pursuing a policy of capital levy. There is talk of an expenditure tax. I do not mind what the label is, but with


the fall in the value of money the Government are not only taxing personal capital gains but gradually eroding the country's capital. This does not just apply to a few rich people. It applies to lots of people who have their little parcels of savings. It applies to trade unions, who have great sums in equities.
It is important in these discussions to try to get behind the Government's mind. I do not know whether the Financial Secretary represented the Government's mind on the subject when he said in Committee on 25th May:
We have heard a lot about the position of the investor who makes a gain in money terms which does not reflect the real gain in terms of purchasing power. To put it the other way round, there is not a real gain in purchasing power because it is posited"—
What dreadful terms one picks up from the Treasury!:
that the monetary gain is only sufficient to maintain the value in terms of purchasing power of the original investment.
This is meant to be a clarification!:
But in that situation, which is one of inflation, one must also look at the position of investors who do not make gains, investors who have invested in other forms of investment where they do not make gains."—[OFFICIAL REPORT, 25th May, 1963; Vol. 713, c. 370.]
What does that mean—apart from the hon. and learned Gentleman's longwinded terms?
What the Financial Secretary meant was that there was something wrong, something immoral, in a person endeavouring to maintain capital for his business or family. He meant that there was something positively wrong there, and that it had to bear not only a Capital Gains Tax but a capital levy; that some people were so foolish, so unwise, so unbusinesslike that they did not know how to go about things, so they should not be allowed to protect the value of their money in real terms. If that is still the policy of the Government—and I have spoken to expose this because it ought to be exposed—let us have it made clear. Then the country can learn what it is. If it is not the policy of the Government, then without a shadow of doubt the Amendment moved by my hon. Friend ought to be accepted forthwith.

Mr. Harold Lever: We are all grateful to the hon. Member who raised this point and to the

Opposition in relation to this matter. I hope that my hon. and learned Friend the Financial Secretary will not mind my saying that the Opposition are doing their best to enlighten the House and to help to improve the Bill. Look at what they did yesterday to effect what, after all, was a minor improvement, unless it was something to atone for the unjust action taken in relation to the Chancellor of the Exchequer earlier.
I acquit the Opposition of any fractious, foolish action in raising this point. In raising the point about Capital Gains Tax they have not debased the currency by talking of double tax. Double tax, so far as it has a useful meaning, is when there is applied to the same corpus of profit the same tax more than once. It is not at all the same to say that indirectly or directly money bears tax more than once. This has been happening for centuries inevitably and inescapably and without injustice. If I buy a motor car I buy it from my taxed income. If that income bears Surtax it is too bad, but I am using my taxed money to buy a taxed article just the same as when I buy petrol in order to run that car.
This talk about double tax is beside the point but under a cocoon of bad argument there is a real grievance. It is that tax is levied not on the real but on the paper profits. Here not only have the Opposition a case but they have an unanswerable case. The only trouble about the unanswerable case is that it is an utterly useless one to the House. It is unanswerable and it is unremediable at the same time. If we were to attempt to remedy the grievance, which is a grievance inevitable in our lives and since the Battle of Waterloo our currency has been depreciating, it is inevitable that there should be an exactly unremediable injustice arising from the currency.
A man may start a business with £10,000 as a leather merchant and at the end of the year he has £10,500. The £500 represents his profit and he is duly taxed. No one says that we should apply a logarithmic table to what he has earned and that there has been an addition of 5 per cent. to his net capital so that therefore, instead of 10s. in the £ of his paper profit being taken, he should be given a reduction on last year's tax. No one suggests that. The trouble about the


case of the Opposition is that it is an excellent theoretical case, but it is unanswerable. My hon. Friends are unwise to attempt to answer an unanswerable case. The real difficulty is that we all wish we had a currency which did not alter, but, having one which alters in an unpredictable way at unpredictable rates, we have to do the best we can in our tax arrangements. The tax on the paper profit, that is, in terms of currency, is the only one which can be used by the tax gatherer in deciding our affairs.
Therefore, we pay the capital profit on precisely the same basis as the income profit. Many a man, for example, holds Government stock which produces an income profit, which has always been taxed even under the benign, intelligent, flexible Conservative government. None of these remedies was applied to the unfortunate chap who had Government stock in that period and then found the capital value declining or the buying power rate of the £ declining. That was not a case in which Conservative Chancellors were moved to rebate tax on income. We have to act in a sensible and fair manner. One of the things we have to do in deciding the rate of Income Tax and Capital Gains Tax is to take that factor into account.
It is not a silly argument which the Opposition make but one which cannot be exactly remedied in any sensible way. The sensible thing to do in fixing the rates of these taxes is to remember that we are dealing with a currency which changes in value. That is what the Chancellor has done. Whether he has succeeded to the satisfaction of every hon. Member is a matter for argument, but a different argument from that put forward by this Amendment, which cannot be acceptable to any Chancellor with any opinion about this tax or any other.

Mr. David Price: The hon. Member for Manchester, Cheetham (Mr. Harold Lever) is not quite up to his best form tonight because if he had studied the method of raising Capital Gains Tax in other countries he would have found that the proposal made by the Chancellor is unique. Other countries have a descending rate of capital gains tax. That is one way of meeting this problem

and the other way is that proposed by the Amendment.
In support of my hon. Friend the Member for Shipley (Mr. Hirst) and my hon. Friend the Member for Worthing (Mr. Higgins) I will give the House one illustration of the extent to which there is an element of capital levy in what is presented to us as a capital gains tax. It has never been presented honestly by the Chancellor as a capital levy. The longer the asset is held and the higher the rate of inflation during the term of the asset, the greater will be the element of capital levy in the taxable charge.
If this tax at the rate proposed by the Government had been in force in 1914 and continued unamended to the present day, we would have the situation that an asset worth £1,000 in 1914 if sold in 1964, 50 years later, would realise £4,930. That would have been the mystery change in the paper value to maintain its real value. There would be a gain of £3,930, which works out at a tax of £1,179, leaving £3,751. If that were scaled down with the depreciating value of money according to the Treasury Index, we find that in 1914 terms the person would be left not with £1,000 but with £761. That is an element of capital levy of somewhere between 23 per cent. and 24 per cent. over 50 years I hope that that simple illustration will show—[An hon. Member: "Nonsense."] There is no nonsense about it. These figures are taken from the Treasury Index. If the hon. Member for Westhoughton (Mr. J. T. Price) suggests that my arithmetic is wrong, let him say so.

Mr. J. T. Price: I did not say it was nonsense. Someone else may have used that description, but I did not. I was not saying that it was nonsense but I was disagreeing because the hon. Member has not presented all the factors in the argument. If he is dealing with a physical asset he knows from his business experience, which is considerable, that one has to deal with items of depreciation. One cannot discount the fact that the asset is wearing out.

Mr. David Price: The hon. Member for Westhoughton, with his normal understanding of these matters, is adding to my argument. I have tried to illustrate how much the element of capital levy


there is in this so-called Capital Gains Tax. It would be much straighter of the Government to say that there is an element of capital levy in this and let us have that on the record. Let us also remember that this tax is chargeable not only on the living but on the dead. A famous English poet once wrote:
Oh grave! where is thy victory?
Oh death! where is thy sting?
I can only observe that Alexander Pope had certainly never met Dr. Kaldor or his sidekick, the present Chancellor of the Exchequer.

7.30 p.m.

Mr. H. P. G. Channon: Most hon. Members on this side would agree with the first half of the proposition advanced by the hon. Member for Manchester, Cheetham (Mr. Harold Lever), namely, that the Opposition have an unanswerable case. I am glad to have the hon. Gentleman's support on that. However, I do not think that our case is irremediable, as the hon. Gentleman went on to argue. I was particularly interested in the hon. Gentleman's reference to the Battle of Waterloo, because I was trying to calculate—it is an impossible task to calculate—what would have happened to an asset worth, say, £1,000 at the time of the Battle of Waterloo. Capital Gains Tax at 30 per cent., taking this rate, would probably have been paid on it about three or four times during the course of the 150 years which have since elapsed. I should not think that there would be anything left of the asset.
I agree with the remark made by my hon. Friend the Member for Worcester (Mr. Peter Walker), both in Committee and today, that the subject of this debate is the most important aspect of the Capital Gains Tax. If this country is to operate a Capital Gains Tax, which is something which I do not oppose, it must be a Capital Gains Tax which is equitable and fair. I am sorry that my definition of "equitable and fair" does not meet with the approval of the Government. I maintain that, if it is sought to introduce a tax on capital gains, it is totally unfair to levy it, not on real capital gains, but on notional capital gains. I am certain that as time passes no Government would ever be able to go on supporting this tax as at present conceived.

As the years pass, the full force of what is proposed will become clear, and I do not think it will be possible for the tax to last for long.
What will happen after 50 years of the operation of this tax, if it remains totally unamended? My hon. Friend the Member for Eastleigh (Mr. David Price) pointed out how the value of any asset held over the past 50 years would have been reduced by as much as one-quarter had this tax been in force during that period. I see no reason for assuming that the rate of inflation over the next 50 years will be smaller than that which obtained over the last 50 years. At the present rate it will be much greater. What would happen to an investment worth £100 today which does not appreciate at all in real terms but on which Capital Gains Tax is paid in 15 years' time?
My hon. Friend the Member for Shipley (Mr. Hirst) reminded the House of some remarks made in Committee by the Financial Secretary about people whose investments have made no net gain. I ask the House to consider someone whose investments have made no real gain, someone who has been unfortunate, unskilful or unlucky enough to invest in a company whose assets have not in the past 10 years made any real gain and which will not in the next 10 years make any real gain. Such a person will be penalised to an enormous extent when he has to pay Capital Gains Tax. If the tax were to be levied at a rate much lower than 30 per cent., it would be possible to argue that this provision would not matter very much. It is totally inequitable and unfair to fix the rate at 30 per cent. but to make no allowance whatsoever for the fall in the value of money.
That is the only point I wish to make today. I support the idea of a Capital Gains Tax, but I do not support this Capital Gains Tax. Any capital gains tax introduced in this country must be one which taxes real capital gains. If such a tax were introduced, I, for one, would not oppose it. I hope that we shall fight to the bitter end in opposing this unfair tax.

Mr. MacDermot: This subject is one which a number of hon. Members said is a very important one in relation to the Capital Gains Tax. I would not disagree with that proposition. It is one


which we discussed at some length in Committee. Hon. Members opposite have tabled a no doubt carefully considered Amendment raising the same question in a different form here again on Report. The arguments which we have heard today in support of the Amendment are, with one exception, the same as those which we heard in Committee. The one exception is the rather remarkable argument adduced by the hon. Member for Worthing (Mr. Higgins) which went slightly wide of the Amendment and suggested, indeed, that the whole of Capital Gains Tax was a form of double taxation. My hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), in his usual cogent way, disposed of that argument. If the argument were logical and right, it would, for example, mean that all forms of direct taxation would be forms of double taxation.

Mr. Higgins: I entirely accept the terminological point made by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) about double taxation, but I do not think that the fact that I used that term loosely to cover the point I was making affects the argument. The hon. Member for Cheetham merely made a terminological amendment to my argument.

Mr. MacDermot: Then the hon. Gentleman's argument is another form of the same argument, which is that one should build into the Capital Gains Tax a hedge against inflation. It is quite right that many people deliberately, when they are considering investment, rather than seeking from their investment to get a substantial addition to their income, seek a form of investment the primary object of which is to provide a hedge against inflation. An Amendment of this character, if carried, would benefit, in particular, people who have invested their money either in land or in equities.
The arguments which have been adduced in support of the Amendment gave us examples of the widow living on the rent from two small houses. We are used to hearing from hon. Members opposite the illustration of the widow in support of their arguments. They naturally do not support their arguments by deploying the case of the property dealer, for example, who would be the

chief beneficiary from an exemption of this kind. If the concern of hon. Members opposite is with the widow, I must point out that their Amendment would not help the widow. [Interruption.] The hon. Member for Eastleigh (Mr. David Price) had not arrived in the Chamber when the Amendment was moved by the hon. Member for Worcester (Mr. Peter Walker), who supported his argument by quoting the example of the widow with two small houses.
I am merely pointing out to hon. Members opposite that the lady in question would not benefit from the Amendment, unless she were a Surtax payer or somebody very near to the Surtax class. The Amendment would benefit only those who would pay Capital Gains Tax at the flat rate of 30 per cent. What hon. Members opposite seem to forget, or choose not to remember, is that the flat rate of 30 per cent. is one which by and large will apply only to the Surtax payer. The vast majority of ordinary taxpayers, if called upon to pay Capital Gains Tax, would benefit from the alternative basis of charge.
If the Amendment were carried, the result would be that the person whose marginal rate of tax is the ordinary standard rate of Income Tax would pay Capital Gains Tax at just over 20 per cent. If the marginal rate were at the reduced rate of tax, which a very large proportion of taxpayers are paying, it would be lower still. None of those people is to be protected under the Opposition's Amendment. Their Amendment is one whose sole effect would be to assist the Surtax payer who is paying tax on his capital gains at the flat rate of 30 per cent.
The arguments have been stated very fully before. I never sought to deny in our debates in Committee that there can be an inflationary element in a capital gain. It is one of the deplorable effects of inflation—something which we all seek to cure. I respond to the invitation of my hon. Friend the Member for Cheetham to concede that fact, and I concede it as I did in Committee. I also entirely agree with him that the right way and the only practical way to give recognition to this factor in relation to a Capital Gains Tax is to take it into account and give proper weight to it when determining the


rate of tax. This again is a point which I made, and indeed it is the first point which I made when we were discussing this matter in Committee.
In our debate on the rate of tax I was weighing up and showing the various factors which have got to be taken into consideration in determining a proper rate of tax. One of them is that in a time of inflation there will be this somewhat artificial inflationary element in the gain. Hon. Members know that, generally speaking, our starting point is that capital gains, insofar as they represent an increase in wealth, should be subject to taxation as much as income. If matters stood there and no other factors were taken into account, one would aim at fixing the Capital Gains Tax at a comparable rate to Income Tax and Surtax. That has been done in some countries which have imposed a capital gains tax.
However, there are other factors, and this is one of them. Giving effect to it is one of the reasons why my right hon. Friend has fixed the rate much lower than the rate of tax on income—as I say, 30 per cent. for the Surtax payer, 20 per cent. for the standard rate Income Tax payer, and lower rates than that for the person on the reduced rate.

Mr. Heath: Could the Financial Secretary address his mind to the one point to which I have never had an answer from the other side of the House? It is this. If out of one's savings one buys an article which is on a level which is subject to Capital Gains Tax—if, for example, one buys a grand piano and the money value of this increases with the rate of inflation, which is roughly what has happened since 1945 with these articles, and one wants to sell it and buy a similar article, one is subject to the rate. This means that one cannot get a comparable article. It does not matter what adjustments are made about the rates; it does not alter this fact.

Mr. Brian Walden: Bad luck.

Mr. Heath: The hon. Gentleman who is a distinguished economist and a Parliamentary Private Secretary says "Bad luck". I believe it is worse than that. It is a bad tax.

Mr. MacDermot: As I said to the right hon. Gentleman before, and as I said in Committee, the answer is that if one is to seek to build into the tax system a built-in hedge against inflation, the place to start is not with the investor in land and the owner of equity capital. That is, broadly speaking, the people for whose benefit this Amendment is designed. Looking at it from the capital point of view, the people who are really hardest hit in a period of inflation are not the equity owners. Part of the passage in which I dealt with this matter in Committee has been quoted. The fact is that during a period of inflation the inflation itself enhances the gain of the equity owner compared with other owners of property. It is the person who is living on a small fixed income who suffers most from inflation. There is no suggestion of a special form of tax rebate to assist the person who is living on a small fixed income derived from capital. These are the people who suffer most.
It is an impossible task to write into the taxation system hedges against inflation. One country has tried it but abandoned the attempt. If one is to attempt to do it, the place to start is not the place which hon. Members opposite have chosen in their Amendment. The argument which has already been used is perfectly sound, namely, that inflation affects not only the person who makes capital gains but the wage-earner as well. The wage-earner whose wages increase, even if the increase is such that it does not bring him into a higher marginal rate of tax, still on average will be paying a higher rate.
7.45 p.m.
Take the case of a wage-earner who has had an increase in his wages, which exactly keep pace with the increase in the cost of living, and nothing more. Because the proportion of his earnings taxed at the marginal rate increases, the effect is that his average rate of tax over his whole earnings will increase. There is no built-in protection against that. So the argument can continue. This is a fact that affects people throughout our taxation system.
The other argument that was put forward boldly by the hon. Member for Eastleigh was that there was no other country that had introduced a capital


gains tax that had not got some built-in provision against inflation. I think he suggested they all had an abatement system, as it is called, providing for a gradual reduction in the rate of tax depending on the length of time for which the asset is held. The hon. Gentleman is mistaken. The country which has a capital gains tax nearest in type to the one that we are introducing is America. America tried the abatement system in the 1920s. It has been abandoned there. They found in American that it did not work, that it did not produce justice, and they got rid of it.
We were given the example of Sweden. Sweden, like many other countries which have introduced the abatement system, did so in relation to an entirely different kind of capital gain tax. They did so starting with a tax comparable to our short-term tax, where the whole of the gains are added to the income and are liable to their equivalent of Income Tax and Surtax, a higher rate of tax. If one does that, one must provide for abatement provisions. But, as I said in Committee, I understand that there has been much criticism of these provisions in Sweden, and the Swedish Government have appointed a Committee to look into the question of a capital gains tax.

Mr. John Hall: The hon. and learned Gentleman mentioned America. Would he tell the House the rate at which the capital gains tax is charged in America and the point in income at which it impinges on the individual?

Mr. MacDermot: I think I am right in saying that the rate is 25 per cent. Our proposed rate is 30 per cent. for the Surtax payer and 20 per cent. for the ordinary taxpayer. I do not know what comfort the hon. Gentleman gets from that. He is presumably talking about the federal taxes. There are also the State taxes. If I may remind hon. Members of of "MacDermot's Law", is they want to compare the rate of one tax in America with ours, they must also compare the rate of other taxes in order to draw a true comparison.

Mr. Julian Ridsdale: Does not the rate begin at £10,000 a year there?

Mr. MacDermot: I do not know if it is correct—

Mr. Harold Lever: It is not relevant.

Mr. MacDermot: —but if it is correct, as my hon. Friend says, it is not relevant to the argument at all. What we are concerned with here is whether there ought to be a built-in provision for hedging against inflation. The Amendment proposes such an abatement for Surtax payers. What difference does it make if the tax with which we are concerned in America begins with people receiving £10,000 a year?

Mr. Peter Walker: If I may take up the point about this being a large Surtax payer, if the only objection that the hon. and learned Gentleman has to the Amendment is that it will apply only to those on the 30 per cent. rate I must tell him that we obviously meant it to apply in proportion to the lower rate as well. I want to make it quite clear to the House that we would welcome any further Amendment needed to ensure that this applies to the lower rate.

Mr. MacDermot: As this is the Report stage of the Bill and one has no opportunity to amend them, I can only address my argument to the Amendments which are moved; but, for the reasons which I have given, we would not in any event find acceptable any provision which attempted to build in a hedge against inflation.

Mr. John Hall: I should like to take up the point raised by my hon. Friend the Member for Worcester (Mr. Peter Walker) in trying to correct the apparently false impression which the Minister has of the effect of our Amendment. It was intended to cover the whole range of people likely to be affected by Capital Gains Tax. It is not our intention to confine it to people in the upper ranges of tax. The Financial Secretary knows that we had an extremely good Amendment, with an extremely good formula in it, debated in Committee. We were driven off that one and, for reasons which the hon. and learned Gentleman understands, we could not table the same Amendment again.
It is clear that over the whole of our debates on the Capital Gains Tax our discussions have been coloured by what


I would describe as the "Kaldor culture". Hon. Members will remember two couplets by Pope and by Sir John Squire which deal with Newton and Einstein. These can be adapted to the economic thinking and policies of the present Government, I suggest, in this way:
Economics and economic laws lay hid in night:
God said, Let Keynes be! and all was light.
It did not last: the Devil howling, 'Ho!
Let Kaldor be ! restored the status quo.
That is what has been happening in these debates.
My hon. Friend the Member for Worcester, supported by my hon. Friend the Member for Worthing (Mr. Higgins), pointed out that the Government had a vested interest in inflation under this form of Capital Gains Tax. Indeed, my hon. Friend the Member for Worthing expounded this with his outstanding analysis of what underlay Government thought, if "thought" is the right word. I am sorry that the hon. Member for Heywood and Royton (Mr. Barnett) is not here. In his intervention he stated that no account was taken of inflation in Income Tax. The Financial Secretary repeated this, but it is not true.
It is true that inflation forces incomes up into higher tax brackets and that if nothing is done to reduce the starting point of tax and to adjust allowances no account is taken of inflation in our Income Tax system. But the fact is that the starting point of taxation is reduced and allowances are adjusted to take account of inflation and therefore there is some provision to take account of inflation in our Income Tax system, although I do not suppose that any of us would necessarily agree that sufficient account is taken of it. It would be wrong, however, to say that no account at all is taken of it.

Mr. Harold Lever: How is the effect of inflation taken into account in taxing the profits of the company to which I referred where the profits are an additional asset during the year? Will the hon. Gentleman tell the House also how inflation is taken into account in the case of those who invest in gilt-edged, even under a Conservative Government, when their income is taxed and inflation all the time is lessening their capital by considerably

more than the income which they receive?

Mr. Hall: We are covering a great deal of previous debates in this matter and I am sure that the hon. Member would not wish me to go into a long discussion of inflation and the Income Tax system, nor would I suggest that the system takes full account of inflation in every case. I accept that it does not, but the fact that it does not take sufficient account is no reason for introducing another form of tax which ignores inflation.
The Financial Secretary made a great mistake in trying to answer what the hon. Member for Manchester, Cheetham (Mr. Harold Lever) described as an unanswerable case. It is unanswerable and there is no point in the Financial Secretary trying to answer it. The hon. Gentleman should say that the Government's intention is to introduce a tax not only on capital gains but on capital. Let us be clear that that is their intention. Why not say so? Why try to evolve elaborate arguments to justify the unjustifiable and to answer the unanswerable?

Mr. Harold Lever: The irremediable.

Mr. Hall: We do not take such a pessimistic view on this side of the House. Nothing will be irremediable to my right hon. Friends when they return to office. Why not make clear exactly what the Government are trying to do? They are trying in the long run to destroy capital. It is as simple as that. Let us be frank about this and not try to produce arguments which convince no one.
I am happy to say that, not for the first time, we are at one with members of the Liberal Party and I was interested to read again the contribution to the Committee stage by the hon. Member for Orpington (Mr. Lubbock) when he said:
I do not think that the Financial Secretary or the Chief Secretary or any member of the Labour Party appreciates how seriously the question of inflation is taken in relation to the Capital Gains Tax outside the Committee in the country as a whole. They must address their minds to this great objection to the Capital Gains Tax in its present form which many people who are sympathetic to the idea of the Capital Gains Tax hold."—[OFFICIAL REPORT, 25th May, 1965; Vol. 713, c. 360.]
Let us be clear that we on this side of the House are not opposing a Capital Gains Tax. What we are opposing, and


I think the Liberal Party is opposing, is a capital tax, which is quite different.
In view of the fact that the spirit of the Amendment has the support in principle of both Opposition parties who together represent the majority of the electorate, and in view of the extremely unsatisfactory answer given by the Financial

Secretary who completely failed to answer our unanswerable case, I would advise my hon. and right hon. Friends to divide the House on the Amendment.

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 273, Noes 276.

Division No. 241.]
AYES
[7.58 p.m.


Agnew, Commander Sir Peter
Dance, James
Iremonger, T. L.


Alison, Michael (Barkston Ash)
Davies, Dr. Wyndham (Perry Barr)
Irvine, Bryant Godman (Rye)


Allan, Robert (Paddington, S.)
d'Avigdor-Goldsmid, Sir Henry
Jenkin, Patrick (Woodford)


Allason, James (Hemel Hempstead)
Dean, Paul
Jennings, J. C.


Amery, Rt. Hn. Julian
Digby, Simon Wingfield
Jones, Arthur (Northants, S.)


Anstruther-Gray, Rt. Hn. Sir W.
Dodds-Parker, Douglas
Jopling, Michael


Astor, John
Doughty, Charles
Joseph, Rt. Hn. Sir Keith


Atkins, Humphrey
Douglas-Home, Rt. Hn. Sir Alec
Kaberry, Sir Donald


Awdry, Daniel
Drayson, G. B.
Kerby, Capt. Henry


Baker, W. H. K.
du Cann, Rt. Hn. Edward
Kerr, Sir Hamilton (Cambridge)


Balniel, Lord
Eden, Sir John
Kilfedder, James A.


Barber, Rt. Hn. Anthony
Elliot, Capt. Walter (Carshalton)
Kimball, Marcus


Barlow, Sir John
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
King, Evelyn (Dorset, S.)


Batsford, Brian
Emery, Peter
Kirk, Peter


Bell, Ronald
Eyre, Reginald
Kitson, Timothy


Bennett, Sir Frederic (Torquay)
Farr, John
Lagden, Godfrey


Berkeley, Humphry
Fell, Anthony
Lambton, Viscount


Berry, Hn. Anthony
Fisher, Nigel
Lancaster, Col. C. G.


Biffen, John
Fletcher-Cooke, Charles (Darwen)
Langford-Holt, Sir John


Biggs-Davison, John
Fletcher-Cooke, Sir John (S'pton)
Legge-Bourke, Sir Harry


Birch, Rt. Hn. Nigel
Foster, Sir John
Lewis, Kenneth (Rutland)


Black, Sir Cyril
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Litchfield, Capt. John


Blaker, Peter
Fraser, Ian (Plymouth, Sutton)
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)


Bossom, Hn. Clive
Galbraith, Hn. T. G. D.
Lloyd, Ian (P'tsm'th, Langstone)


Bowen, Roderic (Cardigan)
Gammans, Lady
Lloyd, Rt. Hn. Selwyn (Wirral)


Box, Donald
Gibson-Watt, David
Longden, Gilbert


Boyd-Carpenter, Rt. Hn. J.
Giles, Rear-Admiral Morgan
Loveys, Walter H.


Boyle, Rt. Hn. Sir Edward
Gilmour, Ian (Norfolk, Central)
Lubbock, Eric


Braine, Bernard
Gilmour, sir John (East Fife)
McAdden, Sir Stephen


Brewis, John
Glover, Sir Douglas
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Brinton, Sir Tatton
Godber, Rt. Hn. J. B.
Mackie, George Y. (C'ness &amp; S'land)


Brooke, Rt. Hn. Henry
Goodhart, Philip
McLaren, Martin


Brown, Sir Edward (Bath)
Gower, Raymond
Maclean, Sir Fitzroy


Bruce-Gardyne, J.
Grant, Anthony
Macleod, Rt. Hn. Iain


Bryan, Paul
Grant-Ferris, R.
McMaster, Stanley


Buchanan-Smith, Alick
Gresham Cooke, R.
McNair, Wilson, Patrick


Buck, Antony
Grieve, Percy
Maginnis, John E.


Bullus, Sir Eric
Griffiths, Eldon (Bury St. Edmunds)
Maitland, Sir John


Burden, F. A.
Griffiths, Peter (Smethwick)
Marten, Neil


Butcher, Sir Herbert
Grimond, Rt. Hn. J.
Mathew, Robert


Buxton, Ronald
Gurden, Harold
Maude, Angus


Campbell, Gordon
Hall, John (Wycombe)
Maudling, Rt. Hn. Reginald


Carlisle, Mark
Hall-Davis, A. G. F.
Mawby, Ray


Carr, Rt. Hn. Robert
Hamilton, Marquess of (Fermanagh)
Maxwell-Hyslop, R. J.


Cary, Sir Robert
Hamilton, M. (Salisbury)
Maydon, Lt.-Cmdr. S. L. C.


Channon, H. P. G.
Harris, Frederic (Croydon, N.W.)
Meyer, Sir Anthony


Chataway, Christopher
Harris, Reader (Heston)
Mills, Peter (Torrington)


Chichester-Clark, R.
Harrison, Brian (Maldon)
Mills, Stratton (Belfast, N.)


Clark, Henry (Antrim, N.)
Harvey, Sir Arthur Vere (Macclesf'd)
Miscampbell, Norman


Clark, William (Nottingham, S.)
Harvey, John (Walthamstow, E.)
Mitchell, David



Harvie Anderson, Miss
Monro, Hector


Clarke, Brig. Terence (Portsmth, W.)
Hastings, Stephen
More, Jasper


Cole, Norman
Hawkins, Paul
Morrison, Charles (Devizes)


Cooke, Robert
Hay, John
Mott-Radclyffe, Sir Charles


Cooper, A. E.
Heald, Rt. Hn. Sir Lionel
Munro-Lucas-Tooth, Sir Hugh


Cooper-Key, Sir Neill
Heath, Rt. Hn. Edward
Murton, Oscar


Cordle, John
Hendry, Forbes
Neave, Airey


Corfield, F. V.
Higgins, Terence L.
Nicholson, Sir Godfrey


Costain, A. P.
Hill, J. E. B. (S. Norfolk)
Noble, Rt. Hn. Michael


Courtney, Cdr. Anthony
Hirst, Geoffrey
Nugent, Rt. Hn. Sir Richard


Craddock, Sir Beresford (Spelthorne)
Hobson, Rt. Hn. Sir John
Onslow, Cranley


Crawley, Aidan
Hooson, H. E.
Orr, Capt. L. P. S.


Crosthwaite-Eyre, Col. Sir Oliver
Hopkins, Alan
Osborn, John (Hallam)


Crowder, F. P.
Hordern, Peter
Osborne, Sir Cyril (Louth)


Cunningham, Sir Knox
Hornby, Richard
Page, John (Harrow, W.)


Curran, Charles
Hornsby-Smith, Rt. Hn. Dame P.
Page, R. Graham (Crosby)


Currie, G. B. H.
Hunt, John (Bromley)
Pearson, Sir Frank (Clitheroe)


Dalkeith, Earl of
Hutchison, Michael Clark
Peel, John




Percival, Ian
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Walder, David (High Peak)


Peyton, John
Smyth, Rt. Hn. Brig. Sir John
Walker, Peter (Worcester)


Pickthorn, Rt. Hn. Sir Kenneth
Soames, Rt. Hn. Christopher
Walker-Smith, Rt. Hn. Sir Derek


Pike, Miss Mervyn
Spearman, Sir Alexander
Wall, Patrick


Pitt, Dame Edith
Speir, Sir Rupert
Walters, Dennis


Pounder, Rafton
Stainton, Keith
Ward, Dame Irene


Powell, Rt. Hn. J. Enoch
Stanley, Hn. Richard
Weatherill, Bernard


Price, David (Eastleigh)
Steel, David (Roxburgh)
Webster, David


Prior, J. M. L.
Studholme, Sir Henry
Wells, John (Maidstone)


Pym, Francis
Talbot, John E.
Whitelaw, William


Quennell, Miss J. M.
Taylor, Sir Charles (Eastbourne)
Williams, Sir Rolf Dudley (Exeter)


Ramsden, Rt. Hn. James
Taylor, Edward M. (G'gow, Cathcart)
Wills, Sir Gerald (Bridgwater)


Redmayne, Rt. Hn. Sir Martin
Teeling, Sir William
Wilson, Geoffrey (Truro)


Rees-Davies, W. R.
Temple, John M.
Wise, A. R.


Renton, Rt. Hn. Sir David
Thatcher, Mrs. Margaret
Wolrige-Gordon, Patrick


Ridley, Hn. Nicholas
Thomas, Sir Leslie (Canterbury)
Wood, Rt. Hn. Richard


Ridsdale, Julian
Thompson, Sir Richard (Croydon, S.)
Woodhouse, Hn. Christopher


Roberts, Sir Peter (Heeley)
Thorpe, Jeremy
Wylie, N. R.


Rodgers, Sir John (Sevenoaks)
Tiley, Arthur (Bradford, W.)
Yates, William (The Wrekin)


Roots, William
Tilney, John (Wavertree)
Younger, Hn. George


St. John-Stevas, Norman
Turton, Rt. Hn. R. H.



Sandys, Rt. Hn. D.
Tweedsmuir, Lady
TELLERS FOR THE AYES:


Scott-Hopkins, James
van Straubenzee, W. R.
Mr. Ian MacArthur and


Sharples, Richard
Vaughan-Morgan, Rt. Hn. Sir John
Mr. Geoffrey Johnson Smith.


Sinclair, Sir George
Vickers, Dame Joan





NOES


Abse, Leo
Edwards, Robert (Bilston)
Hunter, A. E. (Feltham)


Albu, Austen
English, Michael
Hynd, H. (Accrington)


Allaun, Frank (Salford, E.)
Ennals, David
Irving, Sydney (Dartford)


Alldritt, Walter
Ensor, David
Jackson, Colin


Atkinson, Norman
Evans, Albert (Islington, S.W.)
Janner, Sir Barnett


Bacon, Miss Alice
Evans, Ioan (Birmingham, Yardley)
Jay, Rt. Hn. Douglas


Bagier, Gordon A. T.
Fernyhough, E.
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)


Barnett, Joel
Finch, Harold (Bedwellty)
Jenkins, Hugh (Putney)


Baxter, William
Fitch Alan (Wigan)
Johnson, Carol (Lewisham, S.)


Bence, Cyril
Fletcher, Sir Eric (Islington, E.)
Johnson, James (K'ston-on-Tull, W.)


Bennett, J. (Glasgow, Bridgeton)
Fletcher, Ted (Darlington)
Jones, Dan (Burnley)


Binns, John
Fletcher, Raymond (Ilkeston)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Bishop, E. S.
Floud, Bernard
Jones, J. Idwal (Wrexham)


Blackburn, F.
Foley, Maurice
Jones, T. W. (Merioneth)


Blenkinsop, Arthur
Foot, Sir Dingle (Ipswich)
Kelley, Richard


Boardman, H.
Foot, Michael (Ebbw Vale)
Kenyon, Clifford


Boston, T. G.
Ford, Ben
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Bottomley, Rt. Hn. Arthur
Freeson, Reginald
Kerr, Dr. David (W'worth, Central)


Bowden, Rt. Hn. H. W. (Leics S.W.)
Galpern, Sir Myer
Leadbitter, Ted


Boyden, James
Garrett, W. E.
Ledger, Ron


Braddock, Mrs. E. M.
George, Lady Megan Lloyd
Lee, Rt. Hn. Frederick (Newton)


Bradley, Tom
Ginsburg, David
Lee, Miss Jennie (Cannock)


Bray, Dr. Jeremy
Gourlay, Harry
Lever, Harold (Cheetham)


Broughton, Dr. A. D. D.
Greenwood, Rt. Hn. Anthony
Lever, L. M. (Ardwick)


Brown, Rt. Hn. George (Belper)
Gregory, Arnold
Lewis, Arthur (West Ham, N.)


Brown, Hugh D. (Glasgow, Provan)
Griffiths, David (Rother Valley)
Lewis, Ron (Carlisle)


Buchan, Norman (Renfrewshire, W.)
Griffiths, Rt. Hn. James (Llanelly)
Lipton, Marcus


Buchanan, Richard
Griffiths, Will (M'chester, Exchange)
Mabon, Dr. J. Dickson


Butler, Herbert (Hackney, C.)
Gunter, Rt. Hn. R. J.
McBride, Neil


Butler, Mrs. Joyce (Wood Green)
Hale, Leslie
McCann, J.


Callaghan, Rt. Hn. James
Hamilton, James (Bothwell)
MacColl, James


Carmichael, Neil
Hamilton, William (West Fife)
MacDermot, Niall


Chapman, Donald
Hamling, William (Woolwich, W.)
McGuire, Michael


Coleman, Donald
Hannan, William
Mclnnes, James


Conlan, Bernard
Harper, Joseph
McKay, Mrs. Margaret


Corbet, Mrs. Freda
Harrison, Walker (Wakefield)
Mackenzie, Gregor (Rutherglen)


Craddock, George (Bradford, S.)
Hart, Mrs. Judith
Mackie, John (Enfield, E.)


Crawshaw, Richard
Hattersley, Roy
McLeavy, Frank


Crosland, Rt. Hn. Anthony
Hazell, Bert
Mahon, Peter (Preston, S.)


Crossman, Rt. Hn. R. H. S.
Healey, Rt. Hn. Denis
Mahon, Simon (Bootle)


Cullen, Mrs. Alice
Heffer, Eric S.
Mallalieu, J. P. W. (Huddersfield, E.)


Dalyell, Tam
Henderson, Rt. Hn. Arthur
Manuel, Archie


Darling, George
Herbison, Rt. Hn. Margaret
Mapp, Charles


Davies, Ifor (Gower)
Hobden, Dennis (Brighton, K'town)
Marsh, Richard


Davies, S. O. (Merthyr)
Holman, Percy
Mason, Roy


Delargy, Hugh
Horner, John
Maxwell, Robert


Dell, Edmund
Houghton, Rt. Hn. Douglas
Mayhew, Christopher


Dempsey, James
Howarth, Harry (Wellingborough)
Mellish, Robert


Diamond, Rt. Hn. John
Howarth, Robert L. (Bolton, E.)
Mendelson, J. J.


Dodds, Norman
Howell, Denis (Small Heath)
Mikardo, Ian


Doig, Peter
Howie, W.
Millan, Bruce


Driberg, Tom
Hoy, James
Miller, Dr. M. S.


Duffy, Dr. A. E. P.
Hughes, Cledwyn (Anglesey)
Milne, Edward (Blyth)


Dunn, James A.
Hughes, Emrys (S. Ayrshire)
Molloy, William


Dunnett, Jack
Hughes, Hector (Aberdeen, N.)
Monslow, Walter


Edelman, Maurice
Hunter, Adam (Dunfermline)
Morris, Alfred (Wythenshawe)







Morris, Charles (Openshaw)
Rees, Merlyn
Taylor, Bernard (Mansfield)


Morris, John (Aberavon)
Rhodes, Geoffrey
Thomas, George (Cardiff, W.)


Mulley, Rt. Hn. Frederick (Sheffield Pk)
Richard, Ivor
Thomas, Iorwerth (Rhondda, W.)


Murray, Albert
Roberts, Albert (Normanton)
Thomson, George (Dundee, E.)


Neal, Harold
Roberts, Goronwy (Caernarvon)
Thornton, Ernest


Newens, Stan
Robertson, John (Paisley)
Tinn, James


Noel-Baker, Francis (Swindon)
Robinson, Rt. Hn. K. (St. Pancras, N.)
Tomney, Frank


Noel-Baker, Rt. Hn. Philip (Derby, S.)
Rodgers, William (Stockton)
Tuck, Raphael


Norwood, Christopher
Rogers, George (Kensington, N.)
Urwin, T. W.


Oakes, Gordon
Rose, Paul B.
Varley, Eric G.


Ogden, Eric
Ross, Rt. Hn. William
Wainwright, Edwin


O'Malley, Brian
Rowland, Christopher
Walden, Brian (All Saints)


Oram, Albert E. (E. Ham, S.)
Sheldon, Robert
Walker, Harold (Doncaster)


Orbach, Maurice
Shinwell, Rt. Hn. E.
Wallace, George


Orme, Stanley
Shore, Peter (Stepney)
Watkins, Tudor


Oswald, Thomas
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Weitzman, David


Owen, Will
Short, Mrs. Renée (W'hampton, N. E.)
Wells, William (Walsall, N.)


Page, Derek (King's Lynn)
Silkin, John (Deptford)
White, Mrs. Eirene


Paget, R. T.
Silkin, S.C. (Camberwell, Dulwich)
Whitlock, William


Palmer, Arthur
Silverman, Julius (Aston)
Wigg, Rt. Hn. George


Pannell, Rt. Hn. Charles
Silverman, Sydney (Nelson)
Wilkins, W. A.


Pargiter, G. A.
Skeffington, Arthur
Willey, Rt. Hn. Frederick


Park, Trevor (Derbyshire, S.E.)
Slater, Mrs. Harriet (Stoke, N.)
Williams, Alan (Swansea, W.)


Parkin, B. T.
Small, William
Williams, Clifford (Abertillery)


Pavitt, Laurence
Snow, Julian
Williams, Mrs. Shirley (Hitchin)


Pearson, Arthur (Pontypridd)
Soskice, Rt. Hn. Sir Frank
Williams, W. T. (Warrington)


Peart, Rt. Hn. Fred
Spriggs, Leslie
Willis, George (Edinburgh, E.)


Pentland, Norman
Steele, Thomas (Dunbartonshire, W.)
Wilson, Rt. Hn. Harold (Huyton)


Perry, Ernest G.
Stewart, Rt. Hn. Michael
Wilson, William (Coventry, S.)


Popplewell, Ernest
Stonehouse, John
Winterbottom, R. E.


Prentice, R. E.
Stones, William
Woof, Robert


Price, J. T. (Westhoughton)
Strauss, Rt. Hn. G. R. (Vauxhall)
Wyatt, Woodrow


Probert, Arthur
Summerskill, Hn. Dr. Shirley
Yates, Victor (Ladywood)


Pursey, Cmdr. Harry
Swain, Thomas
Zilliacus, K.


Randall, Harry
Swingler, Stephen



Rankin, John
Symonds, J. B.
TELLERS FOR THE NOES:


Redhead, Edward
Taverne, Dick
Mr. Charles Grey and




Mr. George Lawson.

Mr. Marcus Kimball: I beg to move Amendment No. 321, in page 15, line 13, after "deducting", to insert:
the cost of any valuation necessary to determine the amount of chargeable gain so accruing".
The object of the Amendment is to deal with the problem of valuation expenses, which seems much more serious than the Chancellor or the Financial Secretary has ever given credit for during the course of the Bill. The problem is the same old one that we mentioned in the Committee, that of a beneficiary who receives a small amount of capital from a trust and by receiving it creates a liability to capital gains. It is grossly unfair that such a beneficiary should have to pay large bills, amounting even to hundreds or perhaps thousands of pounds, for the valuation of real property held in a trust.
Under the Bill the trustees of a settlement are not liable for the Capital Gains Tax. The liability for it falls upon the beneficiary. The trustees could very well argue that they had no power to have these necessary valuations made at the expense of the trust fund. If the tax were payable by the trustees and not the beneficiary, I am advised that

the provisions of the 1925 Trust Act would give them adequate power and, what is more important, adequate protection to enable them to pay and employ agents to make the valuation.
I have made the case very briefly. It is a perfectly simple and straightforward one. The proposed words represent an essential alteration to the Bill if trustees and others are to be protected. I sincerely trust that the Financial Secretary will accept the Amendment.

Mr. MacDermot: The hon. Member for Gainsborough (Mr. Kimball) referred to the application of the Amendment particularly in relation to trusts. The Amendment itself is drawn in wider terms and not limited to this problem, and I do not follow completely the particular problem which the hon. Member has in mind.
I would say generally that, as I understand it, the Amendment is probably unnecessary unless there is a particular point which has been overlooked. It proposes to insert words to make it clear that before chargeable gains become taxable there has to be deducted from them the cost of any valuation necessary to determine the amount of such gains. As a matter of form, expenses such as those


of valuation are not a deduction from chargeable gains but are a deduction in computing the chargeable gains. For this reason, the matter of deductible expenses is dealt with in Schedule 6, in paragraphs 4 and 5, which deal with the computation of gains. Paragraph 4(2,b) provides that the incidental cost of the acquisition or disposal may be deducted in arriving at the amount of the chargeable gains and to be included are:
costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation under this Schedule".
Therefore, the purpose of the Amendment, as we understand it, appears to be met to the extent anyway that it relates to the valuations which are necessary because they will be required by the Bill.
I give an assurance to the House that in practice it is the intention of the Revenue to interpret this requirement as meaning that the cost of any valuation which was actually used in the computation of the chargeable gains would be allowable as a deduction. I hope that meets the hon. Member's point.

Mr. Kimball: In view of the assurance given by the Financial Secretary, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 20.—(CAPITAL GAINS ACCRUING TO AN INDIVIDUAL: ALTERNATIVE CHARGE TO TAX.)

8.15 p.m.

Mr. MacDermot: I beg to move Amendment No. 22, in page 16, line 12, to leave out from the beginning to "the" and to insert "(a) where".

Mr. Deputy-Speaker (Sir Samuel Storey): It will be for the convenience of the Committee to consider at the same time Amendment No. 23, in the name of the right hon. Member for Bexley (Mr. Heath), in line 12, leave out from "equal" to end of line 14 and insert:
, in the case of an individual not falling within the charge to surtax in the relevant year of assessment, to one-half of the amount on which he would have been chargeable to capital gains tax for that year under the last foregoing section and in every other case to two-thirds of the said amount".

Mr. MacDermot: Might we also consider at the same time, Mr. Deputy-Speaker,

Government Amendment No. 24, in line 14, at end insert:
does not exceed five thousand pounds, on a sum equal to one-half of that amount, and
(b) where that amount exceeds five thousand pounds, on a sum equal to two thousand five hundred pounds, plus the excess of that amount ever five thousand pounds".

Mr. Deputy-Speaker: Yes.

Mr. MacDermot: The two Government Amendments deal with the same point. Clause 20 as it stands provides that if it is to the advantage of the individual he can claim the alternative rate of charge by having the gain added to the top slice of his income. The Government Amendments are the two that I referred to just now which will reduce the fraction of the gain if added to the individual's income for the purpose of the alternative basis of charge from two-thirds to a half, but they also provide that the half rate shall not apply to more than £5,000 of the gain. If in one year an individual realises more than £5,000 in gain, the excess is to be taxed pound for pound as the top slice of his income.
The consequence of this is that on the first £5,000 of his gains it will be to the individual's advantage to have the alternative basis provided, but the benefit which accrues in that way will rapidly be withdrawn on any excess of gains over £5,000 until he reaches a point at which overall it would be to his advantage instead to have his gains taxed at the flat rate of 30 per cent.
I said when we were discussing this question in Committee that we had considered the possibility of making one half of the gain taxable and providing a cutoff, but we envisaged then a tapering provision which would have been exceedingly complicated, and I rejected it for that reason. But the solution which we have now arrived at, and which I hope will commend itself to the House, is one which administratively will be much easier to work. I think it will achieve the object which we all want, which is designed to help the small man, and will ensure an appreciable reduction in the rate of charge for people who are not paying Income Tax at higher than the standard rate. In this way the solution is one which does not extend and carry right up the scale in a way that would have eroded the basis of the tax.
The Amendment tabled by the Opposition proposes that for individuals who are not liable to Surtax the protection in Clause 20 of the Bill should be a half and that for individuals who are liable to Surtax the fraction should be two-thirds. I imagine that that was intended to be more favourable to the taxpayer, but I do not know. We shall hear, no doubt, whether hon. Members opposite had time to consider the Government Amendments at the time when they framed their Amendment. Perhaps I can just say at this stage that we take the view that the Government Amendments would, in fact, be more favourable to the taxpayer. I can let hon. Gentlemen opposite have some tables to illustrate the point if that would assist them, but perhaps they will accept it in general terms from me. Certainly the Government Amendments would be easier to operate.

Mr. Peter Walker: Of the many improvements which we on this side have been able to make to this Bill this is probably one of the most important. When, in Committee, we moved a somewhat similar Amendment to this, though I agree it had certain provisions which we ourselves have altered now in the Amendment we have put down, it was in opposition to the Government's attitude then that the major concession they were willing to give was that a person at the standard rate of Income Tax would have the rate reduced to 37½ per cent.
Due to very considerable pressures by us on this side, pointing out how very high and penal a rate of 30 per cent. would be, and the need for some concession to those with smaller incomes, the Government have taken this action, and we are pleased that they have, to reduce the rate to a person at the standard rate of Income Tax to something just over 20 per cent. I would point out that in comparison to what applies in other countries this is not a very generous concession. The rate in the United States is nearer to 11 per cent., and there the concessions are granted on what is already a lower rate of Capital Gains Tax.
However, this is certainly an important improvement, although it is one, I would point out, which creates an even wider gap between taxation upon the individual investing in life assurance funds, unit trust

funds, investment trust funds, and that upon the individual investing directly into the market. Now we have a situation where, for example, the person saving through the medium of life assurance, because life funds will be taxed, will be taxed at the rate of 35 per cent., whereas a person at the standard rate of Income Tax will be taxed at the rate of 20 per cent. As far as unit trusts are concerned, the Clause which we so successfully moved at a late hour last night will go some way to narrow the gap, but I think that perhaps if we had fully recognised the effects of this Amendment we would have moved 20 per cent. in that Clause rather than the figure of 30.
However, we welcome this Amendment and are gratified that our hard debates in Committee, in which the Financial Secretary pointed out the administrative difficulties in doing this type of thing, are bearing fruit, and those administrative difficulties have disappeared, and that the Government have decided to give the concession we outlined in Committee.

Amendment agreed to.

Further Amendment made: In page 16, line 14, at end insert:
does not exceed five thousand pounds, on a sum equal to one-half of that amount, and
(b) where that amount exceeds five thousand pounds, on a sum equal to two thousand five hundred pounds plus the excess of that amount over five thousand pounds."—[Mr. MacDermot.]

Mr. MacDermot: I beg to move, Amendment No. 25, in page 17, line 31, to leave out from "D" to "the" in line 32 and to insert "(i) where".
This is purely consequential upon the Amendment we were just discussing.

Amendment agreed to.

Mr. MacDermot: I beg to move, Amendment No. 26, in page 17, line 34, after "section" to insert:
does not exceed five thousand pounds, on a sum equal to one-half of that amount, and
(ii) where that aggregate amount exceeds five thousand pounds, on a sum equal to two thousand five hundred pounds plus the excess of that aggregate amount over five thousand pounds.
The same applies to this Amendment. I should, perhaps, have said in one sentence that these two Amendments substitute the more favourable rate we have just been discussing in the case where


both husband and wife are chargeable on their gains.

Amendment agreed to.

Clause 21.—(DISPOSAL OF ASSETS AND COMPUTATION OF GAINS.)

Mr. Harold Lever: I beg to move Amendment No. 134, in page 18, line 37, to leave out "and" and to insert "but".

Mr. Deputy-Speaker: We can discuss with this, the hon. Member's Amendments No. 135, in page 18, line 38, leave out "applies in particular" and insert "does not apply", and Amendment No. 136, in page 19, leave out lines 1 to 5.

Mr. Lever: I confess that the Amendments have been somewhat lazily drafted because for the sake of simplicity I have knocked out some of the wording, which might be useful or not, in relation to matters which I do not propose to discuss. The substance of my Amendments is this. Clause 21(3) provides that when a person receives compensation for the loss of an asset destroyed or partially destroyed or when a person receives payment under an insurance policy in respect of an asset lost, damaged or destroyed those receipts of compensation whether by an insurance policy or otherwise should be deemed to be receipts exactly as if they had been received in the case of the ordinary disposal of the asset. The effect is this, that if one has a piece of furniture which one bought for, say, £1,000, and years later it becomes worth £10,000, and it catches fire and is totally destroyed, and one receives £10,000, its value under the insurance policy, one is said, or deemed for the purpose of the Bill, to have made a capital gain of £9,000. This will be taxable. In its original form the Bill had it taxable, as I understand it, and there was an end of it, but there was a Government Amendment to Schedule 8 and the effect of that will be that, if the asset is replaced one is relieved of the tax.
It is my submission that this Clause must be amended in the way I suggest and that the principle adopted by the Chancellor in the Bill at present is wrong. The first point I wish to bring to the attention of the House is that what it is proposed to tax is not a profit upon the realisation of an asset. I am going throughout to use the argument of the

insurance policy because it is the strongest point I have to make, and I can make some comment on the other aspects afterwards. The argument is that when one receives money upon one's insurance policy in respect of the destruction or loss of the asset this is just the same as if one receives the money on the sale or disposal of the asset and it should be so treated for the purpose of capital gains.
The first thing that we have to ascertain is, has there been any capital gain when a man has his property destroyed and he receives payment under an insurance policy? Let us forget the insurance policy, and get down to the reality of the matter. If I have a valuable piece of furniture and it is destroyed by fire, or if I have a valuable piece of silver and it is stolen by a burglar and not recovered, I have not made any capital gain. I have simply lost the asset in question by theft or destruction. Thus, until the question of payment under an insurance policy comes into the picture, even the pedant persuasiveness of the Inland Revenue cannot allege that anything in the nature of a capital gain has occurred.
8.30 p.m.
I am bound to criticise the processes of thought behind the Clause, but I want to make it quite plain that I do not want to discourage or denigrate the zeal of the officials of the Inland Revenue. They have an unrewarding task to perform, and I recognise that they compare very favourably with those in other countries who have a similarly unrewarding task to carry out, but this professional zeal, although entirely admirable, must be subjected to the processes of more general logic than that which prevails in Somerset House. It is inevitable that a certain narrow professionalism of approach is bound to occur because of the zeal of those who discharge this difficult task of organising our revenue purposes, so if I criticise their logic it must not be supposed that I hold them responsible for the form in which the Clause is drafted. Still less do I attribute to Mr. Kaldor any of these processes of logic. I think that when history comes to be written he will emerge as a figure of moderation in the professionalism of Somerset House in that he lived most


of his life outside this perhaps over-professional area.
To come back to my argument, the Clause proposes to tax as a profit something which, in fact, is a loss. Before the insurance payment comes into the picture, there is no capital gain in respect of the asset itself or the realisation of it. It therefore becomes clear that once we bring into account the insurance policy, the supposed, hypothetical, statutory or deemed gain is a capital gain arising out of the insurance policy. This is no more to do with the realisation of the asset than my bet on the favourite in the Derby, when that horse is good enough to win, has to do with the realisation of the horse or the capital gain on the horse.
The insurance policy, in the way that my bet is related to the horse, is related to the value of the asset, but were it not for our rules of insurance there would be nothing to stop a man insuring the same asset 10 times with 10 different companies, provided that they were prepared to pay up on the policy. It is not an inherent impossibility of so doing that makes a man not collect 10 times the value of the asset. It is simply that insurance companies find that when a man insures an asset for 10 times its value it is far more inflammable than it is supposed to be by the law of averages. But that is my argument, that a man might recover 10 times the value of the asset if the insurance companies were prepared to insure it for 10 times the premium.
It is not my right hon. Friend's intention to tax the capital gain on the asset, but rather the receipt of the money from the insurance of the asset. This is clear when one contrasts the position of a man who has insured his assets with that of a man who has not. Nobody suggests that a man who has lost his asset has made a capital gain, but it is suggested that it is a capital gain when he gets an insurance repayment in respect of the loss, which is different from getting the asset back.
One can show that it is the proceeds of insurance and not the proceeds of any realisation at all by showing what really happens, by showing what a man gets back when he pays the risk premiums. When a man insures his property against

theft or fire, he joins a club of people exposed to this risk. They club together and pay a premium, and out of the pool premium those who are unlucky enough to catch fire at a mathematically disadvantageous time in relation to the odds about catching fire get compensated before those who are rather more fortunate in the sequence of inflammability.
Let us assume that it is 100 to 1 against a man's house catching fire and being destroyed. He pays a premium of 1 per cent., the assumption being that in 100 years the insurance company will break even, because his house will catch fire once in 100 years and that will be that. The difficulty is that if a person is unlucky it catches fire in the first year, whereas somebody else's house may not catch fire at all, or not until 99 years afterwards. What we do when we take out an insurance policy is to collect together and provide that out of the premiums that we pay those who are unlucky in the matter of their houses catching fire will get not only their own premiums but the premiums of those who are more fortunate enough in this respect, less expenses. That is the so-called capital gain which the Inland Revenue is to tax, under the mistaken notion that a man who receives money from an insurance policy is getting money from a capital gain on his asset.
He has got nothing in terms of his capital asset. It has been blown up, or burgled, or is in the hands of some robber who is far off. He is merely getting his own and others' premiums back. The Inland Revenue do not even allow, against the so-called profit, what a person has paid by way of premiums in respect of the chattel which is burnt or stolen, although that is the source of the fund from which the supposed capital gain comes. The Inland Revenue does not allow this, because if it did it would draw attention to the utter illogicality of taxing this so-called capital gain. It would then be clear that it was taxing the insurance receipts which originated in the premiums.
In insurance a person pays a sum against a hazard. He gets compensation for the loss that occurs in the event of that hazard occurring. It is the compensation that is then paid that is to be treated as a gain. Let us take the case of my house and its 100 to 1 chance of


being burnt down. If I pay premiums for 100 years and it then burns down I come out exactly square. I get my compensation and I have paid an equivalent sum in premiums. But the Inland Revenue says, "You have made a capital gain amounting to the difference between what you have been paid and the original cost of the house", leaving out of account the fact that the whole of the compensation derives from my insurance premiums.
The Inland Revenue could put forward an arguable case if it said, "If you receive a capital sum from an insurance policy it looks exactly like money yol get from any receipt. Therefore, you are taxable on it." If a person buys a chattel for £1,000 and sells it for £10,000 he is assessed on his £9,000 capital gain. If he buys a chattel for £1,000 and it is burnt or stolen, and he collects £10,000 in insurance, the Inland Revenue says that he is £9,000 better off and that he must therefore pay Capital Gains Tax.
So far this argument, although not very reputable, in logic has a certain feasibility. But the moment that the Inland Revenue says, "You have a capital gain unless you replace the asset", it is departing from the original position.

Mr. Donald Chapman: My hon. Friend will have to take this argument into the realm of exempting from Capital Gains Tax every involuntary realisation.

Mr. Lever: I am not going to cover every involuntary realisation.

Mr. Chapman: My hon. Friend will have to.

Mr. Lever: My hon. Friend says that I will have to. That does not necessarily follow. If it is the purpose of the State to say that when a man dies and his asset passes on to somebody else, that somebody receives an asset and is therefore deemed to have gained by it, although that is not a very attractive argument, because of the rate of Estate Duty, it is not an unreasonable thing to say.
In that case the asset passes from one hand to another, but in the case that I am putting forward the asset has been blown up, destroyed, burgled or carried off overseas. In certain circumstances, one

can, without illogicality, artificially deem an involuntary disposal to be a realisation. It is accepted, even in death, that it is an artificial deeming of disposal. There is no actual disposal there either. Some people would argue that it is unjust. It is a point of whether one thinks that a particular involuntary disposal is suitable to be regarded as a disposal or whether another one is. What is being taxed here is not the proceeds of the asset or the value of the asset. We are taxing the proceeds of a fund of which one becomes a beneficiary in the event of the loss of an asset. Since one is not allowed to set off the premiums against such receipt, it is quite wrong. It would be as if one taxed a man's betting profits but did not allow him to count the stake which he had laid in deciding how much profit he had made.

Mr. Gower: Does the hon. Gentleman consider that this proposition, the realisation of the receipt of insurance money, would be acceptable if allowance were made for the premiums paid?

Mr. Lever: I would not do so, because I am not in favour of taxing insurance policy proceeds. If I were, I would tax them in the manner that the hon. Member for Barry (Mr. Gower) indicates. Since neither I nor the Government are in favour of taxing insurance proceeds, I am not in favour of allowing that against it, because it is not relevant. The Government say that they are not taxing insurance proceeds but that they should be treated as proceeds of a realisation. The Government now propose to say, in a later Schedule, that if one replaces the asset, whatever that may mean, one will not be taxed. I do not know whether it is relevant to make more than a passing reference to the Schedule, but the point is that nobody knowns what "replacement of the asset" means. If I have an absolutely priceless painting, it is odd that, because it is irreplaceable, I should be taxed, because I cannot replace it in this manner.
The point which I seek to make is that when one starts with lack of logic, one ends with even greater lack of logic. The Government do not merely say that it is a disposal. They say that if the citizen suffers a fire or theft and collects his insurance policy he should pay a large sum of tax, but this should depend on


whether he replaces the asset or not. I would ask my right hon. Friend, what business is it of his? When I have a fire and I lose an asset and am paid under my insurance policy, why should I buy a similar asset? Why not any asset I please with the money? What has it got to do with the Inland Revenue? How can one make taxability dependent on replacement of an asset?
The Inland Revenue is placed in the impossible position of saying to the citizen, "If you replace the asset I will not tax you; if you do not replace it I will tax you." This strange proceeding was justified in Committee by saying that it would be inequitable to do otherwise. That is only an assertion. We are given to understand that if one man who sells his assets can get £9,000 and is taxed and his neighbour has the good fortune to have a fire for which he is insured and pays no tax on the insurance policy, the gentleman who pays tax will suffer a paroxysm of envy at the man who had his house burned down or burgled. This is not an argument for introducing this tax.
I do not want to take too long on this—[Interruption.] This is a very important point and a very important principle. I can understand that it is exceedingly unpalatable to my hon. Friend that what I consider to be the misplaced pedantry of the Inland Revenue is, for the first time, brought under proper scrutiny in the House. In Committee the inadequate scrutiny devoted to this very important matter was lamentable. This matter of principle affects many citizens and will affect them for years to come.
8.45 p.m.
I make no apology, if the House will be tolerant, for enlarging upon this matter in some detail for the first time. Now that it has been indicated that I have been too long for the interest of the Treasury bench to be maintained, it is worth mentioning that these complicated tax provisions, which affect every citizen, are going through the House in a manner which means that they are not subjected to the proper scrutiny. They ought to have been discussed upstairs in a totally different manner. Hon. Members with whom I have discussed these matters have told me that they did not even know that

what they now regard as a ludicrous provision of this kind had ever been passed through the Committee. It has not been adequately debated. As far as I can adequately debate it, it will be adequately debated now.
I can illustrate the lack of logic of this provision by drawing attention to a situation of partial damage. I know that my hon. and learned Friend wishes to be brief, but I should like him to dwell on the point at length and to explain to the House the mathematical intricacies which face a man who suffers partial loss to an article which is damaged. What happens if he has a valuable painting, if a corner of it is burned but he wishes to retain the painting after it has been restored, which he does by means of part of the insurance company's payment? He receives a large sum in compensation for the damage to his assets. I shall not complain if my hon. and learned Friend explains this at length to the House. Indeed, I should be extremely amused and pleased to head the details of how partial compensation is to be deemed to be a partial realisation and how a man must spend the partial compensation in order to replace the asset which he still retains by a hypothetical asset which is no longer available. All this will cause me considerable pleasure. I shall listen with the greatest of patience and without intervention to anything which my hon. and learned Friend says on that subject.
I beg my hon. and learned Friend to have in mind the original purpose of the Capital Gains Tax—a purpose and motivation which I support without any hesitation or qualification. As has been said over and over again, we are trying to equalise the position as far as we can of those who pay every penny of tax under P.A.Y.E. and who have it automatically collected from their incomes and those who get tax-free capital gains. I heartily endorse the Chancellor's motivation in introducing a tax which recognises capital accretions and gains in assessing a man's fiscal strength and in assessing the burden which he ought to bear.
But what has that to do with this persistent pedantry, this obstinate defence of an untenable position, in order to pursue academic objectives which would be repugnant to the common sense of 999 men in every 1,000? Why must the


House be troubled with this? Why cannot my hon. and learned Friend rise and say, "We have made a mistake"? The House is always very generous in such circumstances. He can admit that the Treasury Bench has been trapped in the tortuous logic and the labyrinthine ways which prevail at Somerset House, and which very properly prevail there in their efforts, with great zeal, propriety and devotion, to collect our taxes and to make the whole system work well. My hon. and learned Friend could add, "But it has all been a mistake. Let us drop it. Let us go back to the realities". I suspect that that would meet the approval of nine people out of ten who are in favour of a Capital Gains Tax.

Mr. MacDermot: I am sorry if I betrayed same impatience when listening to my hon. Friend. I always listen to him with pleasure when he deploys his arguments with such clarity once, twice and sometimes even the third time. However, when he deploys them for a greater number of times I tend to find them, even though adduced by my hon. Friend, slightly tedious. I should have learned my lesson by now and have realised that any betrayal of impatience on the part of a Treasury Minister tends to prolong rather than shorten the case being put. I promise not to do it again.
My hon. Friend concentrated on the point of a realisation on a loss through an insurance payment. However, his Amendments are much wider than that and, if accepted, would drive the traditional coach and horses through the Capital Gains Tax because they would eliminate liability on a part disposal of an asset. Without a provision for taxing gains on part disposals, the tax could be completely circumvented by people selling their assets piece by piece instead of by one transaction.

Mr. Harold Lever: Mr. Harold Lever rose—

Mr. MacDermot: I trust that my hon. Friend will show a little of that patience which he urges Ministers to show.

Mr. Lever: I, too, regret if I betrayed some impatience, particularly since my hon. and learned Friend is always exceedingly courteous and helpful, as he has been throughout our discussion of the Bill. It might help if I say that I am

not proposing to do anything of the sort he suggested. I did not even know that that would be the consequence of my suggestion. However, it might save the time of the House if I say that if my hon. and learned Friend concedes the insurance point I will not press the other matter.

Mr. MacDermot: I was coming to my hon. Friend's argument concerning insurance. He says that if there is a loss and a man is then paid out by his insurance company for that loss and chooses not to replace the asset and we tax any element of gain in the money the man gets we are taxing a loss. That is not right. We are not taxing a loss. If the man has a loss and is uninsured and, therefore, does not get any payment, then he suffers a loss and, of course, that capital loss he can set off against future gains. It is recognised for what it is and it is treated as such. If, however, he is insured—and the purpose of insurance is to provide against a loss in the circumstances covered by the policy; fire, accident or whatever it may be—then if he does not suffer a loss but realises the value of his asset and chooses not to replace it, what he has done is realised the value of his asset. If there is an element of capital gain in that decision it is right that he should be taxed for it.
Let us consider my hon. Friend's example. The figures do not matter. Assume that a valuable picture originally cost £1,000 and assume that it has appreciated in value to £10,000. Assume that it is not destroyed but that the man decides to sell it. He gets £10,000, makes a £9,000 gain and is taxed on it. Suppose, instead, that the picture is burgled—although we will come to burglary in a moment—or destroyed and he then is paid out £10,000 by his insurance company. He can decide, the choice is his, to do one of two things. Either he is content to take this opportunity to realise his gain, because that is what it is—he realises the capital value of his asset—or he decides to replace it, and we will consider the question of replacement when we come to the Schedule.
Assume that it is not a work of art but something that is completely, utterly and wholly replaceable. Then what he has done is to choose, of his own decision, not to replace the asset but to realise his gain.

Mr. Peter Walker: rose—

Mr. MacDermot: I hope that the House will allow me to complete my explanation.
We next come to my hon. Friend's argument, when he says, "But the gain the man has made there is not a realisation of his asset but the realisation of the premiums which he has paid—and you do not even propose to allow under the Bill the payment of those premiums in some way to be set off against the gain". Certainly not. The reason is that the premiums are a payment made by way of maintenance of his asset or maintenance of the value of it. [HON. MEMBERS: "Oh."] Of course they are. If the asset is held for a trade or business purpose, those premiums are allowed as an expenditure for purposes of Income Tax. That shows their true nature.
For purposes of a capital gains tax, if a man has invested in a building other than his own personal residence and he pays for the maintenance of it, those maintenance payments cannot be set off against the amount of his gain when he realises it by reselling the building. An insurance payment is rightly regarded by everyone as being of that nature. As the result of having taken out an insurance policy, what happens is that when an accident occurs or a fire occurs and he is paid the full value of his asset there has been an occasion of realisation.

Mr. Harold Lever: Would my hon. and learned Friend deal with one point? Dealing with the instance I gave, he said he had received £10,000, just the same as the man who sold had received £10,000. Supposing his compassionate Aunt Mary learned of the uninsured loss of his asset and sent him a cheque for £10,000? Would that be equally a receipt which should be taxed under the Capital Gains Tax, and, if not, why not?

Mr. MacDermot: Because the payment from his beloved Aunt Mary is a gift free of tax which does not attract tax. He would still have suffered the loss, and he would still be able to set off the loss against his future gains. He has suffered the loss, and it is nothing whatever to do with the Revenue if at that moment his aunt decides to make him a present of £10,000.
I was asked to explain the position if he decides to replace the asset. If he replaces the asset, he does not escape liability to tax. He merely defers it. By virtue of replacing the asset, he replaces in the new asset the gain the old asset had already acquired. When he comes to dispose of the new asset, that will be the occasion of realisation and tax will be paid on the full gain that had already occurred in the old asset plus the additional gain in the new one.

Mr. Gower: There is one narrow point which comes out of the hon. and learned Gentleman's argument. If, for some reason, the man is unable to replace his asset within a short time, the very payment of the tax may make it impossible or diminish his ability to replace the asset in the longer term.

Mr. MacDermot: That is not the argument at the moment. The argument is whether moneys realised through an insurance policy are a realisation of the gain and are the subject of charge. That is why some criminally disposed people have been known to set fire to their houses to claim insurance money. They want to realise the value of their assets at the expense of insurance companies. That shows what the nature of the transaction is.
The same thing happens when a fire occurs involuntarily. It makes no difference to the fact that the man has realised his asset. He has suffered a pecuniary loss. He has lost his building, and he has acquired its capital value in money terms. If he decides to replace, there is no charge to tax, but if he decides to accept that realisation and pocket the gain, he does not thereby escape his liability to tax.

9.0 p.m.

Mr. J. Grimond: I fear that long association with the Bill is in danger of driving the Financial Secretary crazy. He is out of this world. I really think that he may be in danger of serious physical injury. I want to see him going up to someone who has been bashed over the head by burglars and had all his silver stolen and saying to him, "I must congratulate you—you have disposed of your assets. This is splendid. You should make a contribution to the social services and welfare through the Capital Gains Tax." I suppose, on the same basis, a man whose


factory has been burnt out is to be congratulated on having made a capital gain.
I must say something briefly in support of the hon. Member for Cheetham (Mr. Harold Lever), who has already enlivened our proceedings by the one very memorable statement that this will be the only country in the world in which death will in future be treated as a form of tax evasion. Principle has been the watchword of the party opposite. The principle now is that if one is lucky enough to be burgled, and injured in the process, it is the disposal of an asset and liable to Capital Gains Tax—

Mr. Harold Lever: The right hon. Gentleman will realise, of course, that the logic of all this is that to take precautions against burglary will also be a form of tax avoidance.

Mr. Grimond: Of course. When it suits the Treasury it has flexible views of principles. One of the principles of this tax is that one has to dispose of an asset, but a trust that does not dispose of assets still becomes liable to tax every ten years. This matter of principle, therefore, is very flexible, and the Treasury departs from it when it suits the Department to do so. The Treasury have said, "You cannot tax betting winnings because there is no asset," but if a man's factory is burnt out, or his picture is stolen, there is no asset.
This is not the first time we have had odd remarks. In Committee in the small hours of the morning the Minister without Portfolio said:
On reflection, the hon. Member will see that it is not unfair … One has to take the rough with the smooth"—
My Heavens, one does!
To ensure a state of equity between those who have and those who have not insured, it must follow that if a person loses something either through his own negligence or otherwise and thereby receives a capital sum, he is in precisely the same position with regard to other comparable taxpayers as if he had sold it."—[OFFICIAL REPORT, 25th May, 1965; Vol. 713, c. 482.]
"Through the Looking Glass" has nothing like that.
Insurance is designed to put one in a similar position, if one's factory is burnt, or assets destroyed, as one would be in had one retained it. It is not an analogy to say that insurance is the same

as a sale or a gift. I am not prepared to comment on the drafting of this Amendment. The hon. Member is a learned, legal man but his drafting has taken a rather broad sweep in the later stages of the Bill. We have throughout that Order Paper a scattering of short notes saying "Delete this" and "delete that". I am sure the Bill would have a very different shape if it were under the control of the hon. and learned Gentleman. But like him I am concerned with insurance and its liability to Capital Gains Tax.
I want to ask the Treasury Bench some questions. This is something that will matter to a lot of people—if I may have the attention of the Government spokesman. We are dealing here with people, we are not in the rarified atmosphere of some recess in the Inland Revenue. Someone will ultimately suffer severely. Perhaps I could have the attention of an hon. and learned Gentleman. I do not ask for both. Supposing the asset is underinsured—

Mr. MacDermot: I apologise to the right hon. Gentleman. I merely thought that his argument should be retailed to my right hon. Friend the Chief Secretary.

Mr. Grimond: At some other time, if you do not mind.

Mr. MacDermot: I had, perhaps mistakenly, thought that the right hon. Gentleman was not likely to improve on the quality of his first argument—

Mr. Grimond: Indeed I am. I am only just getting under way. You can take the Chief Secretary for a long holiday in August and tell him all the jokes in the Bill.

Mr. Deputy Speaker: Order. I am not going to take the Chief Secretary for a holiday.

Mr. Grimond: I am sorry. I very much appreciate that you, Mr. Deputy-Speaker, would be most unwilling to do that.
Look at the ordinary insurance policy. Suppose that a man is not fully insured and he loses an asset which, if he had sold it, might have been worth £12,000. He gets in insurance £8,000. If he had spent £4,000 when he bought the asset he would be chargeable for capital gain,


whereas he now has a capital loss. Many people are under-insured.
What about the average clause in an insurance policy? What about policies which insure the contents of a whole building and limit the claims on any one asset to a proportion of the total insured by the policy? There is not liability to Capital Gains Tax on assets of under £1,000, but suppose that anyone is liable to certain gains on an asset on which an average clause has to be taken into account. Maybe later in discussion on the Bill we shall have a chance to go into this. The difficulties are enormous and so far have not been appreciated by the Government Front Bench.
It has been suggested to me that if instead of taking the policy one disposes of the policy one will not be liable. I do not know whether that is so, but it is suggested that one could dispose of a policy and take the cash and then be liable to Capital Gains Tax. This is a peculiar situation.

Mr. MacDermot: By "dispose of the policy", does the right hon. Member mean assign the rights under the policy? Is he envisaging assigning for a consideration or not for a consideration?

Mr. Grimond: Dispose for cash. It is seriously suggested that if the policy is disposed of by the insured for a cash sum there is no disposal of an asset for the purpose of this Bill. It would be worth while for the Government to look into this. It is a criminal offence to burn down a house. Does the Financial Secretary seriously suggest that arson would break out all over the country if insurance policies were not liable to the Capital Gains Tax. This is out of this world. The idea that the whole of London will wake up one morning in flames unless Capital Gains Tax is imposed on insurance policies is the most extraordinary thing I have heard in the House of Commons.

Mr. MacDermot: Will the right hon. Member give way?

Mr. Grimond: I will give way in a moment. Of course people cheat in all sorts of ways, as the Financial Secretary knows or he would not be in employment as a barrister. Is it a serious proposition

that if you do not impose this tax arson will break out? I ask you!

Mr. MacDermot: I wondered who the right hon. Member was asking, whether he was asking Mr. Deputy-Speaker. Who does he suggest deployed an argument to the effect that if there was not a liability to Capital Gains Tax there would be arson? If he thinks that is what I said, I urge him to read HANSARD tomorrow.

Mr. Grimond: I am relieved that this is not an attempt to stop tax evasion. I am pleased to hear the Financial Secretary does not think that people will not begin slashing pictures, putting their silver spoons down drains, and burning houses to evade tax. I am glad to have established that point. I cannot believe that any great damage will have been done to the general principle of taxing capital gains if people who suffer the unfortunate disaster of having a fire or a burglary are exempted from Capital Gains Tax on an insurance policy designed to cover just that eventuality. I very much hope that in the name of common sense, ordinary business prudence, humanity and everything else that the House will accept this proposal.

Mr. Peter Walker: May I add a few words in support of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) and the right hon. Gentleman the Leader of the Liberal Party? There have been few debates in which we have heard such complete nonsense from the Treasury Bench as we have heard this evening on this issue. It is a remarkable thing that the Treasury Bench, which throughout the proceedings on the Bill has argued that certain things should be kept separate on principle, has completely failed to separate the insurance aspect of this from the asset.
I ask hon. Members to consider the case of someone who has paid a premium of £1 on an asset worth £1,000. Within a week the asset is destroyed and £1,000 is paid out. It could be argued that in fact there has been a £999 profit on the insurance premium and that perhaps could be taxed. If it was taxed, all the premiums would have to be set against it. However, that would be one logical argument. To say that the capital gain on the asset is to be taxed, a gain which arises not


because of the asset being destroyed but because of the insurance policy being in existence, is nonsense. What should be done logically is to say that, although perhaps there has been a capital gain as a result of the existence of the insurance policy, there has been a capital loss as a result of the asset being destroyed. The policy is paid out, but the asset has gone. Therefore, the whole loss of the asset in its entirety should be set off against the money received from the insurance company. On that basis, there cannot possibly be any capital gain on the insurance policy.

Mr. MacDermot: If this argument is right, when there is the sale of an article the loss of the article should be set off against the gain from the purchase price.

Mr. Walker: I am staggered at the Financial Secretary's attitude. The proceeds received from the sale are not as a result of money provided by the person who has paid it year after year in order to pay out on that sale. The equivalent would be if I were to sell the Financial Secretary an article for £1,000 and I paid him £100 for 10 years and he then paid me the £1,000. He would argue, on his logic, that this was myself acquiring £1,000 upon which I should be taxed, whereas I should have given him the £1,000 which he would be paying to me. The joint premiums paid by all the people holding policies provide the thousands of £s which are paid out. The Financial Secretary has produced no argument on this. He is completely

wrong, and I think he is now beginning to realise that he is wrong. He should accept the Amendments.

Mr. Robert Maxwell: I rise to support, unusually, the hon. Member for Worcester (Mr. Peter Walker). This is the first time I have done so in these debates. I hope that my hon. and learned Friend the Financial Secretary will recognise that a person receiving money under an insurance policy in respect of an asset which is lost merely by virtue of an accident should receive that money as income from an insurance policy and it should not be treated as a capital gain. I hope that my hon. and learned Friend will give in on this issue, because it is a matter of equity and justice.

Mr. Deputy-Speaker: The Question is—

Mr. Harold Lever: I beg to ask leave—

Hon. Members: No.

Mr. Harold Lever: On a point of order. Am I entitled to speak again on the Amendment?

Mr. Deputy-Speaker: Only by leave of the House.

Hon. Members: No.

Question put, That "and" stand part of the Bill:—

The House divided: Ayes 275, Noes 271.

Division No. 242.]
AYES
[9.14 p.m.


Abse, Leo
Brown, Hugh D. (Glasgow, Provan)
Driberg, Tom


Albu, Austen
Buchan, Norman (Renfrewshire, W.)
Duffy, Dr. A. E. P.


Allaun, Frank (Salford, E.)
Buchanan, Richard
Dunn, James A.


Alldritt, Walter
Butler, Herbert (Hackney, C.)
Dunnett, Jack


Atkinson, Norman
Butler, Mrs. Joyce (Wood Green)
Edelman, Maurice


Bacon, Miss Alice
Callaghan, Rt. Hn. James
Edwards, Robert (Bilston)


Bagier, Gordon A. T.
Carmichael, Neil
English, Michael


Barnett, Joel
Chapman, Donald
Ennals, David


Baxter, William
Coleman, Donald
Ensor, David


Bence, Cyril
Conlan, Bernard
Evans, Albert (Islington, S. W.)


Bennett, J. (Glasgow, Bridgeton)
Corbet, Mrs. Freda
Evans, Ioan (Birmingham, Yardley)


Binns, John
Craddock, George (Bradford, S.)
Fernyhough, E.


Bishop, E. S.
Crawshaw, Richard
Finch, Harold (Bedwellty)


Blackburn, F.
Crosland, Rt. Hn. Anthony
Fitch, Alan (Wigan)


Blenkinsop, Arthur
Crossman, Rt. Hn. R. H. S.
Fletcher, Sir Eric (Islington, E.)


Boardman, H.
Dalyell, Tam
Fletcher, Ted (Darlington)


Boston, T. G.
Darling, George
Fletcher, Raymond (Ilkeston)


Bottomley, Rt. Hn. Arthur
Davies, Ifor (Gower)
Floud, Bernard


Bowden, Rt. Hn. H. W. (Leics S. W.)
Davies, S. O. (Merthyr)
Foley, Maurice


Boyden, James
Delargy, Hugh
Foot, Michael (Ebbw Vale)


Braddock, Mrs. E. M.
Dell, Edmund
Ford, Ben


Bradley, Tom
Dempsey, James
Fraser, Rt. Hn. Tom (Hamilton)


Bray, Dr. Jeremy
Diamond, Rt. Hn. John
Freeson, Reginald


Broughton, Dr. A. D. D.
Dodds, Norman
Galpern, Sir Myer


Brown, Rt. Hn. George (Belper)
Doig, Peter
Garrett, W. E.




George, Lady Megan Lloyd
MacDermot, Niall
Robinson, Rt. Hn. K. (St. Pancras, N.)


Ginsburg, David
McGuire, Michael
Rodgers, William (Stockton)


Greenwood, Rt. Hn. Anthony
Mclnnes, James
Rogers, George (Kensington, N.)


Gregory, Arnold
McKay, Mrs. Margaret
Rose, Paul B.


Grey, Charles
Mackenzie, Gregor (Rutherglen)
Ross, Rt. Hn. William


Griffiths, David (Rother Valley)
McLeavy, Frank
Rowland, Christopher


Griffiths, Rt. Hn. James (Llanelly)
Mahon, Peter (Preston, S.)
Sheldon, Robert


Griffiths, Will (M'chester, Exchange)
Mahon, Simon (Bootle)
Shinwell, Rt. Hn. E.


Gunter, Rt. Hn. R. J.
Mallalieu, J. P. W. (Huddersfield, E.)
Shore, Peter (Stepney)


Hale, Leslie
Manuel, Archie
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Hamilton, James (Bothwell)
Mapp, Charles
Short, Mrs. Renée (W'hampton, N. E.)


Hamilton, William (West Fife)
Marsh, Richard
Silkin, John (Deptford)


Hamling, William (Woolwich, W.)
Mason, Roy
Silkin, S. C. (Camberwell, Dulwich)


Hannan, William
Maxwell, Robert
Silverman, Julius (Aston)


Harrison, Walter (Wakefield)
Mayhew, Christopher
Silverman, Sydney (Nelson)


Hart, Mrs. Judith
Mellish, Robert
Skeffington, Arthur


Hattersley, Roy
Mendelson, J. J.
Slater, Mrs. Harriet (Stoke, N.)


Hazell, Bert
Mikardo, Ian
Small, William


Healey, Rt. Hn. Denis
Millan, Bruce
Snow, Julian


Heffer, Eric S.
Miller, Dr. M. S.
Soskice, Rt. Hn. Sir Frank


Henderson, Rt. Hn. Arthur
Milne, Edward (Blyth)
Spriggs, Leslie


Herbison, Rt. Hn. Margaret
Molloy, William
Steele, Thomas (Dunbartonshire, W.)


Hobden, Dennis (Brighton, K'town)
Monslow, Walter
Stewart, Rt. Hn. Michael


Holman, Percy
Morris, Alfred (Wythenshawe)
Stonehouse, John


Horner, John
Morris, Charles (Openshaw)
Stones, William


Houghton, Rt. Hn. Douglas
Morris, John (Aberavon)
Strauss, Rt. Hn. G. R. (Vauxhall)


Howarth, Harry (Wellingborough)
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Swain, Thomas


Howarth, Robert L. (Bolton, E.)
Murray, Albert
Swingler, Stephen


Howell, Denis (Small Heath)
Neal, Harold
Symonds, J. B.


Howie, W.
Newens, Stan
Taverne, Dick


Hoy, James
Noel-Baker, Francis (Swindon)
Taylor, Bernard (Mansfield)


Hughes, Cledwyn (Anglesey)
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Thomas, George (Cardiff, W.)


Hughes, Emrys (S. Ayrshire)
Norwood, Christopher
Thomas, Iorwerth (Rhondda, W.)


Hughes, Hector (Aberdeen, N.)
Oakes, Gordon
Thomson, George (Dundee, E.)


Hunter, Adam (Dunfermline)
Ogden, Eric
Thornton, Ernest


Hunter, A. E. (Feltham)
O'Malley, Brian
Tinn, James


Hynd, H. (Accrington)
Oram, Albert E. (E. Ham, S.)
Tomney, Frank


Irving, Sydney (Dartford)
Orbach, Maurice
Tuck, Raphael


Jackson, Colin
Orme, Stanley
Urwin, T. W.


Janner, Sir Barnett
Oswald, Thomas
Varley, Eric G.


Jay, Rt. Hn. Douglas
Owen, Will
Wainwright, Edwin


Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)

Walden, Brian (All Saints)


Jenkins, Hugh (Putney)
Page, Derek (King's Lynn)
Walker, Harold (Doncaster)


Johnson, Carol (Lewisham, S.)
Paget, R. T.
Wallace, George


Johnson, James (K'ston-on-Hull, W.)
Palmer, Arthur
Watkins, Tudor


Jones, Dan (Burnley)
Pannell, Rt. Hn. Charles
Weitzman, David


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Pargiter, G. A.
Wells, William (Walsall, N.)


Jones, J. Idwal (Wrexham)
Park, Trevor (Derbyshire, S. E.)
White, Mrs. Eirene


Jones, T. W. (Merioneth)
Parkin, B. T.
Whitlock, William


Kelley, Richard
Pavitt, Laurence
Wigg, Rt. Hn. George


Kenyon, Clifford
Pearson, Arthur (Pontypridd)
Wilkins, W. A.


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Peart, Rt. Hn. Fred
Willey, Rt. Hn. Frederick


Kerr, Dr. David (W'worth, Central)
Pentland, Norman
Williams, Alan (Swansea, W.)


Lawson, George
Perry, Ernest G.
Williams, Clifford (Abertillery)


Leadbitter, Ted
Popplewell, Ernest
Williams, Mrs. Shirley (Hitchin)


Ledger, Ron
Prentice, R. E.
Williams, W. T. (Warrington)


Lee, Rt. Hn. Frederick (Newton)
Price, J. T. (Westhoughton)
Willis, George (Edinburgh, E.)


Lee, Miss Jennie (Cannock)
Probert, Arthur
Wilson, Rt. Hn. Harold (Huyton)


Lever, Harold (Cheetham)
Pursey, Cmdr. Harry
Wilson, William (Coventry, S.)


Lever, L. M. (Ardwick)
Randall, Harry
Winterbottom, R. E.


Lewis, Arthur (West Ham, N.)
Rankin, John
Woodburn, Rt. Hn. A.


Lewis, Ron (Carlisle)
Redhead, Edward
Woof, Robert


Lipton, Marcus
Rees, Merlyn
Wyatt, Woodrow


Loughlin, Charles
Rhodes, Geoffrey
Yates, Victor (Ladywood)


Mabon, Dr. J. Dickson
Richard, Ivor
Zilliacus, K.


McBride, Neil
Roberts, Albert (Normanton)



McCann, J.
Roberts, Goronwy (Caernarvon)
TELLERS FOR THE AYES:


MacColl, James
Robertson, John (Paisley)
Mr. Gourlay and Mr. Harper.




NOES


Agnew, Commander Sir Peter
Batsford, Brian
Boyd-Carpenter, Rt. Hn. J.


Alison, Michael (Barkston Ash)
Bell, Ronald
Boyle, Rt. Hn. Sir Edward


Allan, Robert (Paddington, S.)
Bennett, Sir Frederic (Torquay)
Braine, Bernard


Allason, James (Hemel Hempstead)
Berkeley, Humphry
Brewis, John


Amery, Rt. Hon. Julian
Berry, Hn. Anthony
Brinton, Sir Tatton


Anstruther-Gray, Rt. Hn. Sir W.
Biffen, John
Brooke, Rt. Hn. Henry


Astor, John
Biggs-Davison, John
Brown, Sir Edward (Bath)


Atkins, Humphrey
Birch, Rt. Hn. Nigel
Bruce-Gardyne, J.


Awdry, Daniel
Black, Sir Cyril
Bryan, Paul


Baker, W. H. K.
Blaker, Peter
Buchanan-Smith, Alick


Balniel, Lord
Bossom, Hn. Clive
Buck, Antony


Barber, Rt. Hn. Anthony
Bowen, Roderic (Cardigan)
Bullus, Sir Eric


Barlow, Sir John
Box, Donald
Burden, F. A.







Butcher, Sir Herbert
Hay, John
Page, John (Harrow, W.)


Buxton, Ronald
Heald, Rt. Hn. Sir Lionel
Page, R. Graham (Crosby)


Campbell, Gordon
Heath, Rt. Hn. Edward
Pearson, Sir Frank (Clitheroe)


Carlisle, Mark
Hendry, Forbes
Peel, John


Carr, Rt. Hn. Robert
Higgins, Terence L.
Percival, Ian


Cary, Sir Robert
Hill, J. E. B. (S. Norfolk)
Peyton, John


Channon, H. P. G.
Hirst, Geoffrey
Pickthorn, Rt. Hn. Sir Kenneth


Chataway, Christopher
Hobson, Rt. Hn. Sir John
Pike, Miss Mervyn


Chichester-Clark, R.
Hooson, H. E.
Pitt, Dame Edith


Clark, Henry (Antrim, N.)
Hopkins, Alan
Pounder, Rafton


Clark, William (Nottingham, S.)
Hordern, Peter
Powell, Rt. Hn. J. Enoch


Clarke, Brig. Terence (Portsmth, W.)
Hornby, Richard
Price, David (Eastleigh)


Cole, Norman
Hornsby-Smith, Rt. Hn. Dame P.
Prior, J. M. L.


Cooke, Robert
Hunt, John (Bromley)
Pym, Francis


Cooper, A. E.
Hutchison, Michael Clark
Quennell, Miss J. M.


Cooper-Key, Sir Neill
Iremonger, T. L.
Ramsden, Rt. Hn. James


Cordle, John
Irvine, Bryant Godman (Rye)
Redmayne, Rt. Hn. Sir Martin


Corfield, F. V.
Jenkin, Patrick (Woodford)
Rees-Davies, W. R.


Costain, A. P.
Jennings, J. C.
Renton, Rt. Hn. Sir David


Courtney, Cdr. Anthony
Jones, Arthur (Northants, S.)
Ridley, Hn. Nicholas


Craddock, Sir Beresford (Spelthorne)
Jopling, Michael
Ridsdale, Julian


Crawley, Aidan
Joseph, Rt. Hn. Sir Keith
Roberts, Sir Peter (Heeley)


Crosthwaite-Eyre, Col. Sir Oliver
Kaberry, Sir Donald
Rodgers, Sir John (Sevenoaks)


Crowder, F. P.
Kerby, Capt. Henry
Roots, William


Cunningham, Sir Knox
Kerr, Sir Hamilton (Cambridge)
Royle, Anthony


Curran, Charles
Kilfedder, James A.
St. John-Stevas, Norman


Currie, G. B. H.
Kimball, Marcus
Sandys, Rt. Hn. D.


Dalkeith, Earl of
King, Evelyn (Dorset, S.)
Scott-Hopkins, James


Dance, James
Kirk, Peter
Sharples, Richard


Davies, Dr. Wyndham (Perry Barr)
Kitson, Timothy
Sinclair, Sir George


d'Avigdor-Goldsmid, Sir Henry
Lagden, Godfrey
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Dean, Paul
Lambton, Viscount
Smyth, Rt. Hn. Brig. Sir John


Digby, Simon Wingfield
Lancaster, Col. C. G.
Soames, Rt. Hn. Christopher


Dodds-Parker, Douglas
Langford-Holt, Sir John
Spearman, Sir Alexander


Doughty, Charles
Legge-Bourke, Sir Harry
Speir, Sir Rupert


Drayson, G. B.
Lewis, Kenneth (Rutland)
Stainton, Keith


du Cann, Rt. Hn. Edward
Litchfield, Capt. John
Stanley, Hn. Richard


Eden, Sir John
Lloyd, Ian (P'tsm'th, Langstone)
Steel, David (Roxburgh)


Elliot, Capt. Walter (Carshalton)
Lloyd, Rt. Hn. Selwyn (Wirral)
Stodart, Anthony


Emery, Peter
Longden, Gilbert
Studholme, Sir Henry


Eyre, Reginald
Loveys, Walter H.
Talbot, John E.


Farr, John
Lubbock, Eric
Taylor, Sir Charles (Eastbourne)


Fell, Anthony
McAdden, Sir Stephen
Taylor, Edward M. (G'gow, Cathcart)


Fisher, Nigel
MacArthur, Ian
Teeling, Sir William


Fletcher-Cooke, Charles (Darwen)
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Temple, John M.


Fletcher-Cooke, Sir John (S'pton)
McLaren, Martin
Thatcher, Mrs. Margaret


Foster, Sir John
Maclean, Sir Fitzroy
Thomas, Sir Leslie (Canterbury)


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Macleod, Rt. Hn. Iain
Thompson, Sir Richard (Croydon, S.)


Fraser, Ian (Plymouth, Sutton)
McMaster, Stanley
Tiley, Arthur (Bradford, W.)


Galbraith, Hn. T. G. D.
McNair-Wilson, Patrick
Tilney, John (Wavertree)


Gammans, Lady
Maginnis, John E.
Turton, Rt. Hn. R. H.


Gibson-Watt, David
Maitland, Sir John
van Straubenzee, W. R.


Giles, Rear-Admiral Morgan
Marples, Rt. Hn. Ernest
Vaughan-Morgan, Rt. Hn. Sir John


Gilmour, Ian (Norfolk, Central)
Marten, Neil
Vickers, Dame Joan


Gilmour, Sir John (East Fife)
Mathew, Robert
Walder, David (High Peak)


Glover, Sir Douglas
Maude, Angus
Walker, Peter (Worcester)


Godber, Rt. Hn. J. B.
Maudling, Rt. Hn. Reginald
Walker-Smith, Rt. Hn. Sir Derek


Goodhart, Philip
Mawby, Ray
Wall, Patrick


Gower, Raymond
Maxwell-Hyslop, R. J.
Walters, Dennis


Grant, Anthony
Maydon, Lt.-Cmdr. S. L. C.
Ward, Dame Irene


Grant-Ferris, R.
Meyer, Sir Anthony
Weatherill, Bernard


Gresham Cooke, R.
Mills, Peter (Torrington)
Webster, David


Grieve, Percy
Mills, Stratton (Belfast, N.)
Wells, John (Maidstone)


Griffiths, Eldon (Bury St. Edmunds)
Miscampbell, Norman
Whitelaw, William


Griffiths, Peter (Smethwick)
Mitchell, David
Williams, Sir Rolf Dudley (Exeter)


Grimond, Rt. Hn. J.
Monro, Hector
Wills, Sir Gerald (Bridgwater)


Gurden, Harold
More, Jasper
Wilson, Geoffrey (Truro)


Hall, John (Wycombe)
Morrison, Charles (Devizes)
Wise, A. R.


Hall-Davis, A. G. F.
Mott-Radclyffe, Sir Charles
Wolrige-Gordon, Patrick


Hamilton, Marquess of (Fermanagh)
Munro-Lucas-Tooth, Sir Hugh
Wood, Rt. Hn. Richard


Hamilton, M. (Salisbury)
Murton, Oscar
Woodhouse, Hn. Christopher


Harris, Frederic (Croydon, N. W.)
Neave, Airey
Wylie, N. R.


Harris, Reader (Heston)
Nicholson, Sir Godfrey
Yates, William (The Wrekin)


Harrison, Brian (Maldon)
Noble, Rt. Hn. Michael
Younger, Hn. George


Harvey, Sir Arthur Vere (Macclesf'd)
Nugent, Rt. Hn. Sir Richard



Harvey, John (Walthamstow, E.)
Onslow, Cranley
TELLERS FOR THE NOES:


Harvie Anderson, Miss
Orr, Capt. L. P. S.
Mr. R. W. Elliott and


Hastings, Stephen
Osborn, John (Hallam)
Mr. Geoffrey Johnson Smith.


Hawkins, Paul
Osborne, Sir Cyril (Louth)

Mr. MacDermot: I beg to move Amendment No. 27, in page 18, line 41, at the beginning to insert "loss".
In Committee, the hon. and learned Member for Northwich (Sir J. Foster) raised the question, as a drafting point,


whether the Clause covered burglary. We have looked into the matter and, to put it beyond doubt, we propose this Amendment to insert the word "loss", which will cover loss by burglary.

Amendment agreed to.

Further Amendments made: In page 19, line 27, after "trustee", insert:
or for any person who would be so entitled but for being an infant or other person under disability".

In page 19, line 27, after "persons," insert:
who are or would be".—[Mr. MacDermot.]

Clause 22.—(LOSSES.)

Amendment made: In page 20, line 40, after "entire", insert "loss".—[Mr. MacDermot.]

Mr. MacDermot: I beg to move Amendment No. 29, in page 21, line 11, after "structure" to insert:
(including in the site any land occupied for purposes ancillary to the use of the building or structure)".
This is largely a drafting Amendment to make clear that, when a building is destroyed, the restriction on the loss which may be claimed due to increase in the site value is not limited to the area actually covered by the building but includes any land occupied for use with the building. It is a clarifying Amendment to express more clearly the original intention, and it is to the advantage of the taxpayer.

Amendment agreed to.

Mr. MacDermot: I beg to move Amendment No. 30, in page 21, line 13, to leave out subsection (6).
Would it be convenient, Mr. Speaker—I am sorry I did not give you notice of this—to discuss at the same time Amendment No. 83, dealing with the same topic, in Schedule 6?

Mr. Speaker: I do not know. If the House pleases, so be it.

9.30 p.m.

Mr. MacDermot: I am obliged, Mr. Speaker. During the Committee stage hon. Members were concerned to ensure that the Bill made provision for compensation payments for damage to be excluded from the scope of the Capital

Gains Tax to the extent that they were ploughed back into the replacement or restoration of the asset in question. This is a matter to which my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) referred a moment ago. Of the two Amendments, the first does no more than delete the existing subsection (6) of Clause 22, which lays down a special rule for insurance cases where the insurance is not sufficient to cover the cost of the asset which has been destroyed or damaged.

Mr. Peter Walker: On a point of order, Mr. Speaker. The Financial Secretary asked if two Amendments could be taken together. We had not had any notice of this or an opportunity to look at the Amendments. However, on looking at them we prefer that the second one should not be debated at the present moment.

Mr. Speaker: Then let them not be taken together. The House will now deal with Amendment No. 30 only.

Mr. MacDermot: In that case, Mr. Speaker, all I would say is that this is a paving Amendment for Amendment No. 83, the substantive one, which is to make provision for dealing with the situation where compensation moneys are used for the replacement or restoration of an asset.

Amendment agreed to.

Mr. MacDermot: I beg to move Amendment No. 31, in page 21, line 36, to leave out "subsection (5) of".
This is also a paving Amendment. It is a drafting point. The Amendment is a paving Amendment for Amendments Nos. 35 and 36 which are for the benefit of the taxpayer.

Amendment agreed to.

Clause 23.—(DEATH.)

Mr. MacDermot: I beg to move Amendment No. 32, in page 22, line 5, at the beginning to insert:
Subject to section ('transfer of business on retirement') of this Act.
This is a drafting Amendment which is consequential on the decision of the House to accept the new Clause on the transfer of business on retirement.

Amendment agreed to.

Mr. MacDermot: I beg to move Amendment No. 33, in page 22, line 35, to leave out "two" and to insert "three".
May we discuss this Amendment and the next one at the same time, Mr. Speaker? The two go together and deal with the same point.

Mr. Speaker: If the House so pleases. I see gestures of assent.

Mr. MacDermot: I am much obliged, Mr. Speaker. These are the two Amendments to which I referred a moment ago. As Clause 23(5) stands, it provides that allowable losses which accrue to an individual in the year of assessment in which he dies may, in so far as they cannot be deducted from gains accruing in that year, be carried back for the two preceding years. It has been represented to us that this two-year carry-back period is unduly restrictive and ought to be extended. I think that some representations suggested that it should be allowed to be carried back without limit in point of time. We cannot accept that proposition, which would involve reopening assessments for a long period back, but we think that there is force in the representations and propose to the House to increase the carry-back period from two years to three. This is done by Amendment No. 33, and Amendment No. 34 is a consequential drafting Amendment.

Mr. Peter Walker: Although we accept the improvement that has taken place as a result of the Amendment, we still think that in logic it would be correct to go right back and allow past years for an unlimited period. We do not really accept the administrative argument on this, because it is one which works against the taxpayer. Nevertheless, we are pleased that, as a result of the representations we made during the Committee stage, at least some improvement has been made.

Amendment agreed to.

Further Amendment made: In page 22, line 36, leave out from "gains" to end of line 37 and insert:
accruing in a later year before those accruing in an earlier year".—[Mr. MacDermot.]

Mr. MacDermot: I beg to move, Amendment No. 35, in page 23, line 6, at the end to insert:
(8) Allowable losses which accrue to the personal representatives of a deceased person in

the period of three years from the death, may, so far as they cannot otherwise be deducted from chargeable gains, be deducted from chargeable gains accruing to the deceased in the year of assessment in which the death occurs, or in the preceding three years of assessment, taking chargeable gains accruing in a later year before those accruing in an earlier year.
May I point out to the hon. Gentleman the Member for Worcester (Mr. Peter Walker) that this Amendment is one which arises as a result of a point which was raised in Committee, unlike the last Amendment, the subject of which was not, I think, discussed in Committee. This, however, arose on a point raised by the hon. Member himself, and in Committee we gave an undertaking to look into it.
Briefly, the Amendment provides that allowable losses which accrue to the personal representatives of the deceased in the three years following the death and which cannot be set off otherwise against chargeable gains also accruing to the personal representatives may be set against gains which accrued to the deceased in the year of his death or in the three preceding years of assessment. In short, net losses accruing to the personal representatives in the three-year period following the death are treated for this purpose precisely as if they were net losses accruing to the deceased person at his death. It is a point similar to that in the Amendment the House has just accepted.

Mr. Peter Walker: We are delighted that, as the result of this process of constant capitulation by the Treasury Bench, they are gradually accepting our proposals. As the Financial Secretary is well aware, this could have been a very major point, because there could have been considerable sums involved in respect of certain estates. We welcome this Amendment.

Amendment agreed to.

Mr. MacDermot: I beg to move, Amendment No. 36, in page 23, line 20, to leave out "twelve months" and to insert "two years".
This is a somewhat similar Amendment in favour of the taxpayer, dealing with the situation where there has been a deed of family arrangement after the death in effect altering the provisions of the will. The effect of the Amendment is to extend from one year to two years the period in which the deed of family arrangement


can be made so as to be treated as if it had been a disposal by the deceased and thereby avoid a second occasion to charge.

Amendment agreed to.

Clause 24.—(SETTLED PROPERTY.)

Mr. MacDermot: I beg to move, Amendment No. 37, in page 23, line 39, to leave out "body corporate" and to insert "person".
This Amendment makes a small alteration to the provisions of the long-term tax regarding residence of trustees. It deals with a point which was raised by the hon. Member for Crosby (Mr. Graham Page). Indeed, he has an Amendment down, No. 274, which treats of the same point and which I think will be unnecessary if the House accepts this Amendment.
The general rule is that the residence of trustees is determined in this way, that they are ordinarily resident in the United Kingdom, unless the trust is administered outside the United Kingdom and the trustees, or a majority of them, are non-resident. The proviso to Clause 24(1) provides that a body corporate which is carrying on business which consists of, or includes, the management of trusts, and is acting as trustee of the trusts, in the course of that business shall be treated as not resident if the whole of the settled property consists of or derives from property provided by a person not at the time domiciled, resident or ordinarily resident in the United Kingdom. That is the existing position.
Since the publication of the Bill it has been represented to us, in particular by the Law Society, that the benefit of the proviso to which I have referred ought not to be restricted to corporate bodies which carry on the management of trusts, but ought equally to be available to individuals, for example solicitors, who practise, not as companies, but as individuals or in partnership, and manage trusts in the course of their business. This point appears to us to be a valid one, and is met by substituting the word "person" for the words "body corporate".

Mr. Charles Fletcher-Cooke: May I, on behalf of my hon. Friend

the Member for Crosby (Mr. Graham Page) thank the Financial Secretary for this Amendment? It seems extraordinary that there should have been any distinction between a body corporate and an individual person in this connection. One cannot understand how the discrepancy ever crept in. However, now that we have got what we want, it may be ungrateful to say more about that, and I shall therefore restrict myself to thanking the Government for putting the matter right at this late hour.

Amendment agreed to.

Mr. Peter Walker: I beg to move Amendment No. 229, in page 24, line 15, to leave out:
forming part of the settled property
and to insert:
in respect of which the life interest has been determined".
If I was on the other side of the House I would describe this as a drafting Amendment, and I would expect the House quickly to accept it. This is an attempt to give a more specific definition to what we consider to be intended by the Bill, and I hope that it will be accepted in that spirit.

Mr. MacDermot: I have known Members of the Treasury Bench suggest that matters are drafting matters and get away with it, but I have not previously heard this ploy tried by the Opposition Front Bench.
This is far more than a drafting Amendment. It would make a considerable change, one which at first sight, I readily admit, would appear to have attractions; and I do not mind telling the House that when we were originally considering the scope of the Bill and framing it I raised the question whether it would not be right to deal with the matter in the way suggested by the Amendment. However, I was convinced by the arguments that were advanced that it would not be a useful or practical way of dealing with it, for reasons which I shall try to explain to the House.
The Amendment, in effect, proposes that when a life interest in a trust terminates, the trustees should be chargeable only on that fraction of the property of the trust to which the life tenancy which is terminated relates. We assume that that is the intention. If a life tenant


has a fractional interest in the interest on the property he will normally have an interest in all the assets. It is not clear that the Amendment will make any difference in such a case, but I shall argue to what I assume to be the intention underlying the Amendment, which is that in such a case, in effect, it is only tax on a proportionate fraction that should be payable.
9.45 p.m.
A fractional charge on the assets of a trust may appear reasonable, but it would be extremely difficult to operate, not least for the trustees. It would lead to great complications for everyone concerned. It would not be possible to select certain assets of the trust to the value, for example, of a quarter of the total value if the deceased life tenant had a quarter life interest in the income, and to leave those assets to be disposed of by the trustees. Apart from the fact that the life tenant's interest would normally have been a fractional interest in all the assets, there would be no rational basis for making a selection of the assets in question. If the matter were left to the trustees they would choose all the assets which happened to have shown a loss.
The only practicable course would be to provide that the relevant proportion of all the gains on all the assets should be chargeable. This would be an immensely complicated procedure. It would require, first, that the amount of all the assets should be calculated, as is provided in the Clause at present, and then the relevant portion of those gains would have to be charged on Capital Gains Tax. After that, the notional acquisition cost of all the assets would have to be adjusted to an artificial value which reflected neither their true cost to the trust nor their actual market value when the so-called relevant life interest came to an end. There would be immense complication in the bookkeeping and recording necessary to ensure that the charge was properly and fairly enforced. One has to look to the interests of other beneficiaries under the trust.
We considered this proposal, but came to the conclusion—as much in the interests of the trustees as in the interests of the Inland Revenue—that it would not be advisable. It is for that reason that the course proposed in the Bill has been

chosen. It represents what we believe to be the only possible one to adopt.

Mr. Fletcher-Cooke: When I heard the Financial Secretary speak I wondered whether we were really discussing Amendment No. 229, which I imagined to be the one moved by my hon. Friend the Member for Worcester (Mr. Peter Walker). The Financial Secretary pretended that it was in the best interests of the trusts and trustees that this Amendment should be rejected, which is totally contrary to the facts. The facts are that, largely through Estate Duty law, the monstrous principle has crept into taxation law that unless one is careful, every time a life interest passes the whole property is subject to tax—not merely the life interest, or the slice of the assets representing the life interest, but the whole corpus. I have always thought that this was unfair. It may be avoided with great skill in the Estate Duty world, but why we should repeat this principle in respect of capital gains I cannot understand.
The present provision is particularly dangerous It was in respect of this that my hon. Friend the Member for Hendon, North (Sir Ian Orr-Ewing) in Committee pointed out to the Minister without Portfolio that even an advance for the purposes of education, or something of that sort, might be held to form a termination of the life interest in a part of the settled property and thus attract the full Capital Gains Tax on the full corpus of the settlement. This argument was rejected by the Minister without Portfolio, but since then I have been advised that those who are learned in these matters are not totally satisfied with his answer, and that in the normal process of trusts there is a danger that an advance for the purposes of education, or for setting up a beneficiary in his trade or business, will be held to terminate the life interest in a part of the settled property, and that that being so the full amount of Capital Gains Tax will be attracted for the whole capital value of the settlement.
If that happened—and it was held to have happened in one case—in all subsequent cases no one would ever make an advancement for educational purposes, for purposes of setting up in trade or for the normal purposes of advancement. This would inhibit enormously the powers


of trustees and the rightful exercise of those powers, because they would bring down upon their heads and upon the head of the capital of the corpus of the whole settlement this vast tax. I hope that this is wrong, but a great many people think that what I am saying is right. That being so, I hope that we can be reassured that the normal powers of advancement do not constitute, for this purpose, the termination of a life interest in any part of the settled property.
Even if that is right and we can be reassured on this, I must ask the Financial Secretary to think again about whether it is in the best interests of the trustees and of the beneficiaries that, every time a life interest passes, the whole amount of the capital is subject to this tax. Of course it is not in their best interests. This is the way a headmaster treats a pupil when he is about to beat him: he says that it is in the pupil's best interests. Of course, it is in the best interests of every beneficiary that tax should be attracted only to that slice of the corpus which passes on the life interest. It may be, for administrative reasons, that we cannot test it; I do not understand that; but to pretend that it is in the interests of the subject that the whole amount of the capital should, every time the life interest passes, be subject to this is—if I may use an unparliamentary expression—humbug.

Sir D. Glover: A very good Parliamentary expression.

Mr. MacDermot: If I may have leave to speak again. I am not sure whether the question of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) is directly relevant, but I would assure him that an advance of the kind he described would not be a determination of an interest so as to be an occasion of charge—

Mr. Fletcher-Cooke: Or any part of it?

Mr. MacDermot: The only other comment which I would make—

Sir Hugh Lucas-Tooth: When the hon. Gentleman says "advance", does he mean an advance made under statutory powers or any advance, however made, under the trust? There is a big difference and I think that he is referring only to the first.

Mr. MacDermot: I was referring to the specific question which I was asked, about the advance for educational purposes.
What we are concerned with in the Amendment is not what constitutes the determination of a life interest, but how the assessment to charge shall be made when that occurs. For the reasons which I have explained, we are satisfied that, in the interests of trustees as well—we have had no representations on this to the contrary—the procedure laid down in the Bill is the only practicable one.

Amendment negatived.

Mr. MacDermot: I beg to move, Amendment No. 38, in page 24, line 19 at the end to insert:
(4A) If, in the case of the death of any individual, no relief is given under subsection (2) of the last foregoing section, or relief which is given in respect of an aggregate sum which is less than the amount available for relief under the said subsection (2),, then that amount or, as the case may be, the difference between that amount and the aggregate sum in respect of which relief is so given shall be available for giving relief under this subsection, and—

(a) any gains which accrue to the trustees of a settlement on the disposal of settled property deemed to be effected at the date of the death in accordance with subsection (3) or subsection (4) of this section on the termination of a life interest by the death, or otherwise in consequence of the death, shall be aggregated and only so much of that aggregate as exceeds the amount so available for giving relief under this subsection shall constitute chargeable gains,
(b) if subsection (5) below has operated to prevent subsection (4) applying on the date of the death paragraph (a) above shall apply to gains accruing on the disposal of the settled property deemed to be effected on the next occasion (if any) when subsection (4) applies,
(c) in arriving at the aggregate—

(i) the respective amounts of the gains shall be computed in accordance with the provisions of this Act (other than this subsection) fixing the amount of chargeable gains, and
(ii) any allowable loss which accrues on the disposal shall be deducted,

and the provisions of this subsection shall not affect the computation of the amount of any allowable loss,
(d) if this subsection applies in relation to chargeable gains accruing to more than one body of trustees on the same death, the amount available for relief under this subsection shall be apportioned between those bodies of trustees according to the respective values of the settled property which those


trustees are deemed respectively to have disposed of,

and the references in this subsection to the amount available for relief under subsection (2) of the last foregoing section are references to five thousand pounds or as the case may be to that amount as reduced (or extinguished) under section ("transfer of business on retirement") of this Act.
This Amendment implements an assurance which I gave in Committee when dealing with an Amendment by right hon. and hon. Gentlemen opposite, the effect of which would have been that the unused balance of the £5,000 death exemption should be allowed to be set off against gains accruing to trustees in consequence of that death. I said on that occasion that we should be prepared to allow any unused portion of the £5,000 exemption to spill over to the trust property, and that is what this somewhat lengthy Amendment is designed to do.

Mr. Peter Walker: We welcome the new Patronage Secretary, the hon. Member for Cardiff, West (Mr. George Thomas). At any rate, he is occupying the seat usually occupied by the Patronage Secretary. Indeed, we can well understand the appointment of a new Patronage Secretary.
Once again, we welcome this important Amendment. It was a very wrong omission from the original Bill, and we are very pleased at the manner in which the suggestions which we made in Committee have been received by the Financial Secretary. We are grateful to him for proposing the Amendment.

Amendment agreed to.

The Minister without Portfolio (Sir Eric Fletcher): I beg to move Amendment No. 39, in page 24, line 23, to leave out "ten" and to insert "fifteen".

Mr. Speaker: May I invoke the help of the House on how the following Amendments may be grouped?

Sir Eric Fletcher: I think that it would be convenient if we considered together Amendments Nos. 39, 40, 41, 42, 43, 44, 47, 48, 49, 50, 51 and 52.

Hon. Members: Hear, hear.

Mr. Speaker: I gather that the House so pleases.

Sir Eric Fletcher: The whole of these Amendments refer to a discussion which

we had in Committee, and they are designed to implement an undertaking which I gave in Committee. The House will recall that Clause 24(4) provides that on the termination of a life interest in possession of all or part of the settled property, all the assets comprised in the settlement are deemed to be disposed of and reacquired by the trustees.
In order to prevent the trustees of a settlement from being charged too frequently to Capital Gains Tax on notional disposals in the case of a trust with several life interests simultaneously in possession, subsection (5) provides that the interval between any two charges shall not be less than ten years. If I may give an example, suppose that a trust were set up in year one and a life interest terminated in year three, the trustees would then be charged on the gains accruing on the notional disposal at that time. But if a further life interest fell in between, say, years three and thirteen, the trustees would not be charged until year thirteen, the conception being that there should be no second charge to Capital Gains Tax except after an interval of ten years, but that after ten years they should then be charged whether or not a life interest terminated at that point of time. In order to deal with the case of the discretionary trust where no life interests fall in, subsection (6) provides that such trusts are to be charged every ten years.
In Committee, these proposals were criticised on the ground that the ten-year interval was too short. Amendments were put down by the Opposition suggesting that the period of ten years should be extended. Some hon. Members suggested twenty-one years and others suggested twenty-five years. At that stage I gave an assurance that if the Amendments were withdrawn the Government would put down a series of Amendments to extend the period of ten years to fifteen years. The Opposition Amendments were not, in fact, withdrawn. Nevertheless, the Government wish to implement the undertaking which I gave, and the whole of these series of Amendments gives effect to that undertaking.

10.0 p.m.

Mr. Fletcher-Cooke: The whole concept of notional disposal is, as the


Minister without Portfolio knows, repulsive to my hon. Friends and I, and it does not make it any better that the notional disposal takes place at 15-year intervals instead of at 10-year intervals. The notional disposal concept is, of course, another aspect of how this tax is turned from a Capital Gains Tax into a capital levy or wealth tax.
It is as though when one is dealing with Income Tax one says that someone who is not working as hard as he might shall be taxed on the sort of income that he could earn if only he exerted himself. It is the same principle, translated into the Capital Gains Tax. It is saying, "These trustees are not turning over their investments as fast as we want them to so that the Treasury can have its cut and, therefore, we will tax them as if they were". It is, to our way of thinking, totally foreign to the concept of a real, genuine, sincere and honest Capital Gains Tax.
If the theory behind the Capital Gains Tax is, as I believe it to be, that those who depend entirely on earned income do not like to see people enjoying capital gains, if one is to have parity of reasoning and parity of burden then, as I said when I first spoke on this subject, the Treasury should tax the wage earner as if he had earned the full wage of which he was capable, whether or not he had earned it.
Why trustees and settlements should be singled out for the notional disposal treatment I do not know. It may be that a great many of them do not turn over their investments as quickly as the Treasury would like, but they are in a fork here. If they turn them over too quickly they get subjected to the short-term Capital Gains Tax at a very high rate. If they do not turn them over fast enough, along comes the Treasury and says, "We will tax you as if you had".
It is difficult to know at what speed the prudent, reasonable or governmentally approved of trustee should turn over or switch his investments. It is a monstrous thing to tax people for a capital gain which they have never made simply because the Treasury wants the money. I do not believe that the interval of another five years—and I am talking

here of trusts without a life interest; there are not only discretionary trusts—makes any difference. We know that the Treasury does not like discretionary trusts and I have some sympathy with that view. As I say, there are many trusts without life interests. There are trusts for persons with a disability, persons of unsound mind and so on. There may be no life interest whatever. I do not understand why these trusts should be singled out for this revival of the law of mortmaine, as I mentioned in Committee.
Companies are entitled to sit on their investments for many years without turning them over. If companies and corporations are not subjected to this 15 or 10 year assessment of what they would have made if they had turned over or switched their investments why should settlements be so singled out?
This seems a most monstrous imposition and the Government have as yet said nothing to persuade me that this is anything but the thin end of a very dangerous wedge indeed. I wrote about this in the columns of The Times at the time of the Budget Statement. The mere fact of extending this Domesday Book from 10 to 15 years leaves my withers quite unwrung.

Mr. Scott-Hopkins: I completely support the remarks of my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) and I hope that the Minister will particularly consider the case of an estate which has been left in trust to a minor, someone aged one or two. It would appear from the 15-year provision that when the minor becomes of age the estate, perhaps a farm, will be valued and the Capital Gains Tax will be paid on the value. This could lead to great hardship, even to the breaking up of the estate, which would be a very bad thing, particulary if it were a farm.
Under the present Administration, with increasing inflation, the 15-year provision may cause great hardship. I urge the Minister without Portfolio to again consider the time factor and realise that the difficulties which may be caused resulted in my hon. Friends suggesting the period of 21 years in Committee. It is an important issue, and I hope the Minister without Portfolio will think about it.


because hardship will be incurred by imposing a 15-year period.
We heard during the Report stage that a decision had been deferred in respect of widows and so on. Where a minor is concerned, I think it is quite inequitable that an estate should be valued for the purposes of Capital Gains Tax, and it could well lead to the disposal of part of the estate to pay the tax. It is quite unfair, and I hope the Minister without Portfolio will think again and change the period of time he is now trying to write into the Bill.

Mr. Peter Walker: While supporting the cogent arguments of my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) and my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins), the only way I can summarise the Amendments is by the reference I made to them in Committee, when I said:
One realises therefore, that this is a thoroughly bad Clause, and the Amendments in the names of my hon. and right hon. Friends of the Liberal Party all express these very real problems. None of these have been answered and the concession offered by the Minister was an insult after the debate. It has been obvious throughout the debate that the Government are unwilling to listen to realistic arguments and that it is a waste of time for us to argue against them."—[OFFICIAL REPORT, 26th May, 1965; Vol. 713, c 704.]
Now that they have had a longer time to consider those arguments, they have shown once again that they are unwilling to listen to logical reasoning. This is a mean, unimportant concession, in the sense that it is a concession. We will have to support it and let it go through, but I regret that the Government have not given more consideration to the very cogent arguments in that debate.

Sir Eric Fletcher: The issue is whether the period should be 10 or 15 years, and I understand from what the hon. Member for Cornwall, North (Mr. Scott-Hopkins) says that he is in favour of such an extension. However, I think the hon. Member has misunderstood the effect of the Clause. There is no automatic charge to Capital Gains Tax every 15 years, except in the case of a discretionary trust.

Mr. Fletcher-Cooke: Discretionary or other trusts.

Sir Eric Fletcher: In the case of a discretionary trust the situation would arise in which, unless there was some such provision, such a trust would escape liability to Capital Gains Tax altogether. That would open the door to very considerable evasion, and I do not think that any hon. Member opposite is proposing that in the case of a discretionary trust this Clause should be a complete escape from liability.
In the case which the hon. Member supposed of a trust for an infant, there is no charge to tax when the child becomes 15 or 16 years of age. In a case of that kind, the charge only arises when the life interest passes.

Amendment agreed to.

Further Amendments made: In page 24, line 25, leave out "ten" and insert "fifteen".

In line 28, leave out "ten" and insert "fifteen".

In line 30, leave out "ten" and insert "fifteen".

In line 32, leave out first "ten" and insert "fifteen".

In line 32, leave out second "ten" and insert "fifteen".

In page 26, line 2, after "(4)", insert "(4A)".

In line 6, leave out "1955"and insert "1950".

In line 10, leave out "1955"and insert "1950".

In line 11, leave out "tenth" and insert "fifteenth".

In line 13, leave out "tenth" and insert "fifteenth".

In line 14, leave out "ten" and insert "fifteen".

In line 15, leave out "1955"and insert "1950".—[Mr. MacDermot.]

Mr. MacDermot: I beg to move, Amendment No. 53, in page 26, line 15, at the end, to insert:
but subsection (4) of this section shall not be applied by virtue of this subsection (taken together with subsection (6)) on a date falling before 7th April, 1967".
After my earlier hesitation, Mr. Deputy-Speaker, I am now glad to say that I can give a very full explanation of the Amendment if any


hon. Members wish me to do so, but perhaps it is sufficient to say that it introduces a two-year moratorium on the operation of the charge to tax of discretionary trusts under subsection (6).
This Amendment results from an argument which impressed me in Committee. It was then pointed out that if the provision calling for the automatic levy of charge every 15 years on discretionary trusts had to begin to operate immediately as from Budget day, it would mean, owing to the spread provision introduced to see that these charges are spread over the whole of the 15-year period and do not all get bunched up at one moment, that the charges in the first year or two would involve a great deal of labour and result in very little revenue. It seems more satisfactory to have the moratorium for the first two years, which means that not until two years after the tax comes into force will we begin to operate the provision. The work would then produce some useful result. Meanwhile, the tax for those two years will be deferred until after 15 years have elapsed.

10.15 p.m.

Mr. Peter Walker: May I congratulate the Financial Secretary on his recovery and the tremendous zest and enthusiasm which he put into the brief he had just seen for the first time? In fairness to him I should withdraw that statement, because he remembered the debate we had on this question. In fact, however, he remembered it only for the purpose of what he expressed as part of the debate. The point he made was that there would be administrative inconvenience in starting on the valuations within a few months of the Bill coming into operation and also inconvenience for the taxpayer.
The point we made when discussing this in Committee was a suggestion that the first valuation should not take place, when it was to be 10 years, until 1975 and, now that it is to be 15 years, not until 1980, and thereafter on the appropriate anniversaries of the appropriate trusts. Otherwise we should get a situation in which someone whose trust anniversary happened to have fallen in 1967 would have to start revaluing assets of the trust and paying Capital Gains Tax rather earlier than in a trust formed after 1965. This Amendment, however, deals with

part of our complaint and will ease the administrative problems not only of the taxpayer but also, we believe, of the Revenue. For that reason we find the Amendment acceptable.

Mr. R. J. Maxwell-Hyslop: I wish to ask a question of the Financial Secretary. If no provision is made in the trust deed—which presumably there would not be—as to the cost of these periodic valuations, is there anything to enable trust deeds to pay the cost of the valuation out of the trust funds rather than making the beneficiary pay?
This is attributable to a number of different Clauses but it arises here when we are fixing the date at which a trust is to be valued. It is matter of concern that, notwithstanding what is written into the trust deed, the cost of the valuation if any could be met out of the trust rather than out of the residual benefits to the beneficiary of the trust.

Mr. MacDermot: By leave of the House I speak again, but I am not sure that the question arises on the Amendment although it arose in one of our earlier discussions when, I think, the hon. Member for Tiverton (Mr. Maxwell-Hyslop) was not with us. I referred then to a provision in the Schedule which deals with the question of the expenses which can be allowed when calculating tax. I am afraid I cannot answer specifically without notice the question about the position between the trustees and the beneficiaries, but I imagine that there is a general provision entitling trustees to incur proper expenses in the administration of the trust and in the Schedule one would find that would be covered. If the hon. Member has anything further specific to ask about this when he has had an opportunity of looking at the effect of the Amendment, I will write to him.

Mr. Deputy-Speaker (Dr. Horace King): This is a little wide of the Amendment, but having allowed the question, I thought I must allow the answer.

Amendment agreed to.

Clause 25.—(ESTATE DUTY.)

Mr. Deputy-Speaker: The next Amendment is Amendment No. 54:
In page 26, line 20, at end insert:
(2) In estimating the principal value of any property given inter vivos by a deceased


within five years of his death allowance shall be made for any capital gains tax borne in relation to and as a result of making such gift.

Mr. Peter Walker: This is an Amendment which I placed on the Notice Paper to clear up the position of the possibility of Capital Gains Tax paid on a gift inter vivos not having deducted from it Capital Gains Tax. I have received a letter from the Financial Secretary in which he assures me that, as a result of the existing legislation, gifts inter vivos will not suffer from this effect. In view of that, I beg to ask leave to withdraw the Amendment.

Mr. Deputy-Speaker: I am reminded that the hon. Member has not moved the Amendment, so he does not need to withdraw it but refrains from moving it.

Amendments made: In page 28, line 5, leave out "ten" and insert "fifteen".

In line 12, leave out "ten" and insert "fifteen".—[Mr. MacDermot.]

Clause 26.—(MISCELLANEOUS EXEMPTIONS FOR CERTAIN KINDS OF PROPERTY.)

Amendment made: In page 28, line 25, at end insert:
(2A) If the adjusted sale price and adjusted purchase price to be taken into account under

Schedule 6 to this Act in computing the amount of a gain accruing on a disposal of securities of one of the descriptions in Schedule (Capital gains: Government securities issued at a discount) to this Act are both within the exempt price range specified in that Schedule for those securities a gain accruing on that disposal shall not be a chargeable gain (and a loss so accruing shall not be an allowable loss) and if the range between those prices overlaps that exempt price range a proportion of a gain so accruing shall not be a chargeable gain, which shall be the proportion which the part of the range between those prices which overlaps that exempt price range bears to the whole of the range between those prices (and correspondingly a part of a loss so accruing shall not be an allowable loss).

In this subsection "adjusted sale price" means the amount of the consideration for the disposal and "adjusted purchase price" means the amount of the consideration for the acquisition (that is the acquisition by the person making the disposal), both adjusted, where the nominal amount of the securities being disposed of is not one hundred pounds, to represent a price for a nominal amount of one hundred pounds.—[Mr. MacDermot.]

Amendment proposed: In page 28, line 29, at end insert:
(4) British Government securities shall not be chargeable assets.—[Mr. Peter Walker.]

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 274, Noes 279.

Division No. 243.]
AYES
[10.21 p.m.


Agnew, Commander Sir Peter
Buchanan-Smith, Alick
Dean, Paul


Alison, Michael (Barkston Ash)
Buck, Antony
Digby, Simon Wingfield


Allan, Robert (Paddington, S.)
Bullus, Sir Eric
Dodds-Parker, Douglas


Allason, James (Hemel Hempstead)
Burden, F. A.
Doughty, Charles


Amery, Rt. Hn. Julian
Butcher, Sir Herbert
Drayson, G. B.


Anstruther-Gray, Rt. Hn. Sir W.
Buxton, Ronald
du Cann, Rt. Hn. Edward


Astor, John
Campbell, Gordon
Eden, Sir John


Atkins, Humphrey
Carlisle, Mark
Elliot, Capt. Walter (Carshalton)


Awdry, Daniel
Carr, Rt. Hn. Robert
Elliott, R. W. (N'c'tle-upon-Tyne, N.)


Baker, W. H. K.
Cary, Sir Robert
Emery, Peter


Balniel, Lord
Channon, H. P. G.
Eyre, Reginald


Barber, Rt. Hn. Anthony
Chataway, Christopher
Farr, John


Barlow, Sir John
Chichester-Clark, R.
Fell, Anthony


Batsford, Brian
Clark, Henry (Antrim, N.)
Fisher, Nigel


Bell, Ronald
Clark, William (Nottingham, S.)
Fletcher-Cooke, Charles (Darwen)


Bennett, Sir Frederic (Torquay)
Clarke, Brig. Terence (Portsmth, W.)
Fletcher-Cooke, Sir John (S'pton)


Berkeley, Humphry
Cole, Norman
Foster, Sir John


Berry, Hn. Anthony
Cooke, Robert
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)


Biffen, John
Cooper, A. E.
Galbraith, Hn. T. G. D.


Biggs-Davison, John
Cooper-Key, Sir Neill
Gammans, Lady


Birch, Rt. Hn. Nigel
Cordle, John
Gibson-Watt, David


Black, Sir Cyril
Corfield, F. V.
Giles, Rear-Admiral Morgan


Blaker, Peter
Costain, A. P.
Gilmour, Ian (Norfolk, Central)


Bossom, Hn. Clive
Courtney, Cdr. Anthony
Gilmour, Sir John (East Fife)


Bowen, Roderic (Cardigan)
Craddock, Sir Beresford (Spelthorne)
Glover, Sir Douglas


Box, Donald
Crawley, Aidan
Godber, Rt. Hn. J. B.


Boyd-Carpenter, Rt. Hn. J.
Crosthwaite-Eyre, Col. Sir Oliver
Goodhart, Philip


Boyle, Rt. Hn. Sir Edward
Crowder, F. P.
Gower, Raymond


Braine, Bernard
Cunningham, Sir Knox
Grant, Anthony


Brewis, John
Curran, Charles
Grant-Ferris, R.


Brinton, Sir Tatton
Currie, G. B. H.
Gresham Cooke, R


Brooke, Rt. Hn. Henry
Dalkeith, Earl of
Grieve, Percy


Brown, Sir Edward (Bath)
Dance, James
Griffiths, Eldon (Bury St. Edmunds)


Bruce-Gardyne, J.
Davies, Dr. Wyndham (Perry Barr)
Griffiths, Peter (Smethwick)


Bryan, Paul
d'Avigdor-Goldsmid, Sir Henry
Grimond, Rt. Hn. J.




Gurden, Harold
Mackenzie, Alasdair (Ross &amp; Crom'ty)
Rodgers, Sir John (Sevenoaks)


Hall, John (Wycombe)
Mackie, George Y. (C'ness &amp; S'land)
Roots, William


Hall-Davis, A. G. F.
Maclean, Sir Fitzroy
Royle, Anthony


Hamilton, Marquess of (Fermanagh)
Macleod, Rt. Hn. Iain
St. John-Stevas, Norman


Hamilton, M. (Salisbury)
McMaster, Stanley
Sandys, Rt. Hn. D.


Harris, Frederic (Croydon, N.W.)
McNair-Wilson, Patrick
Scott-Hopkins, James


Harris, Reader (Heston)
Maginnis, John E.
Sharples, Richard


Harrison, Brian (Maldon)
Maitland, Sir John
Sinclair, Sir George


Harvey, Sir Arthur Vere (Macclesf'd)
Marples, Rt. Hn. Ernest
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Harvey, John (Walthamstow, E.)
Marten, Neil
Smyth, Rt. Hn. Brig. Sir John


Harvie Anderson, Miss
Mathew, Robert
Soames, Rt. Hn. Christopher


Hastings, Stephen
Maude, Angus
Spearman, Sir Alexander


Hawkins, Paul
Maudling, Rt. Hn. Reginald
Speir, Sir Rupert


Hay, John
Mawby, Ray
Stainton, Keith


Heald, Rt. Hn. Sir Lionel
Maxwell-Hyslop, R. J.
Stanley, Hn. Richard


Heath, Rt. Hn. Edward
Maydon, Lt.-Cmdr. S. L. C.
Steel, David (Roxburgh)


Hendry, Forbes
Meyer, Sir Anthony
Stodart, Anthony


Higgins, Terence L.
Mills, Peter (Torrington)
Studholme, Sir Henry


Hill, J. E. B. (S. Norfolk)
Mills, Stratton (Belfast, N.)
Talbot, John E.


Hirst, Geoffrey
Miscampbell, Norman
Taylor, Sir Charles (Eastbourne)


Hobson, Rt. Hn. Sir John
Mitchell, David
Taylor, Edward M. (G'gow, Cathcart)


Hooson, H. E.
Monro, Hector
Teeling, Sir William


Hopkins, Alan
More, Jasper
Temple, John M.


Hordern, Peter
Morrison, Charles (Devizes)
Thatcher, Mrs. Margaret


Hornby, Richard
Mott-Radclyffe, Sir Charles
Thomas, Sir Leslie (Canterbury)


Hornsby-Smith, Rt. Hn. Dame P.
Munro-Lucas-Tooth, Sir Hugh
Thompson, Sir Richard (Croydon, S.)


Hunt, John (Bromley)
Murton, Oscar
Thorpe, Jeremy


Hutchison, Michael Clark
Neave, Airey
Tiley, Arthur (Bradford, W.)


Iremonger, T. L.
Nicholson, Sir Godfrey
Tilney, John (Wavertree)


Irvine, Bryant Godman (Rye)
Noble, Rt. Hn. Michael
Turton, Rt. Hn. R. H.


Jenkin, Patrick (Woodford)
Nugent, Rt. Hn. Sir Richard
Tweedsmuir, Lady


Jennings, J. C.
Onslow, Cranley
van Straubenzee, W. R.


Johnson Smith, G. (East Grinstead)
Orr, Capt. L. P. S.
Vaughan-Morgan, Rt. Hn. Sir John


Jones, Arthur (Northants, S.)
Osborn, John (Hallam)
Vickers, Dame Joan


Jopling, Michael
Osborne, Sir Cyril (Louth)
Walder, David (High Peak)


Joseph, Rt. Hn. Sir Keith
Page, John (Harrow, W.)
Walker, Peter (Worcester)


Kaberry, Sir Donald
Page, R. Graham (Crosby)
Walker-Smith, Rt. Hn. Sir Derek


Kerby, Capt. Henry
Pearson, Sir Frank (Clitheroe)
Wall, Patrick


Kerr, Sir Hamilton (Cambridge)
Peel, John
Walters, Dennis


Kilfedder, James A.
Percival, Ian
Ward, Dame Irene


Kimball, Marcus
Peyton, John
Weatherill, Bernard


King, Evelyn (Dorset, S.)
Pickthorn, Rt. Hn. Sir Kenneth
Webster, David


Kirk, Peter
Pike, Miss Mervyn
Wells, John (Maidstone)


Kitson, Timothy
Pitt, Dame Edith
Whitelaw, William


Lagden, Godfrey
Pounder, Rafton
Williams, Sir Rolf Dudley (Exeter)


Lambton, Viscount
Powell, Rt. Hn. J. Enoch
Wills, Sir Gerald (Bridgwater)


Lancaster, Col. C. G.
Price, David (Eastleigh)
Wilson, Geoffrey (Truro)


Langford-Holt, Sir John

Wise, A. R.


Legge-Bourke, Sir Harry
Prior, J. M. L.
Wolrige-Gordon, Patrick


Lewis, Kenneth (Rutland)
Pym, Francis
Wood, Rt. Hn. Richard


Litchfield, Capt. John
Quennell, Miss J. M.
Woodhouse, Hn. Christopher


Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Ramsden, Rt. Hn. James
Wylie, N. R.


Lloyd, Ian (P'tsm'th, Langstone)
Redmayne, Rt. Hn. Sir Martin



Longden, Gilbert
Rees-Davies, W. R.
Yates, William (The Wrekin)


Loveys, Walter H.
Renton, Rt. Hn. Sir David
Younger, Hn. George


Lubbock, Eric
Ridley, Hn. Nicholas



McAdden, Sir Stephen
Ridsdale, Julian
TELLERS FOR THE AYES:


MacArthur, Ian
Roberts, Sir Peter (Heeley)
Mr. Martin McLaren and




Mr. Ian Fraser.




NOES


Abse, Leo
Brown, Rt. Hn. George (Belper)
Diamond, Rt. Hn. John


Albu, Austen
Brown, Hugh D. (Glasgow, Provan)
Dodds, Norman


Allaun, Frank (Salford, E.)
Buchan, Norman (Renfrewshire, W.)
Doig, Peter


Alldritt, Walter
Buchanan, Richard
Driberg, Tom


Atkinson, Norman
Butler, Herbert (Hackney, C.)
Duffy, Dr. A. E. P.


Bacon, Miss Alice
Butler, Mrs. Joyce (Wood Green)
Dunn, James A.


Bagier, Gordon A. T.
Callaghan, Rt. Hn. James
Dunnett, Jack


Barnett, Joel
Carmichael, Neil
Edelman, Maurice


Baxter, William
Chapman, Donald
Edwards, Rt. Hn. Ness (Caerphilly)


Bence, Cyril
Coleman, Donald
English, Michael


Bennett, J. (Glasgow, Bridgeton)
Conlan, Bernard
Ennals, David


Binns, John
Corbet, Mrs. Freda
Ensor, David


Bishop, E. S.
Craddock, George (Bradford, S.)
Evans, Albert (Islington, S.W.)


Blackburn, F.
Crawshaw, Richard
Evans, Ioan (Birmingham, Yardley)


Blenkinsop, Arthur
Crosland, Rt. Hn. Anthony
Fernyhough, E.


Boardman, H.
Crossman, Rt. Hn. R. H. S.
Finch, Harold (Bedwellty)


Boston, T. G.
Cullen, Mrs. Alice
Fletcher, Sir Eric (Islington, E.)


Bottomley, Rt. Hn. Arthur
Dalyell, Tam
Fletcher, Ted (Darlington)


Bowden, Rt. Hn. H. W. (Leics S.W.)
Darling, George
Fletcher, Raymond (Ilkeston)


Boyden, James
Davies, Ifor (Gower)
Floud, Bernard


Braddock, Mrs. E. M.
Davies, S. O. (Merthyr)
Foley, Maurice


Bradley, Tom
Delargy, Hugh
Foot, Sir Dingle (Ipswich)


Bray, Dr. Jeremy
Dell, Edmund
Foot, Michael (Ebbw Vale)


Broughton, Dr. A. D. D.
Dempsey, James
Ford, Ben







Fraser, Rt. Hn. Tom (Hamilton)
McBride, Neil
Robinson, Rt. Hn. K. (St. Pancras, N.)


Freeson, Reginald
MacColl, James
Rodgers, William (Stockton)


Galpern, Sir Myer
MacDermot, Niall
Rogers, George (Kensington, N.)


Garrett, W. E.
McGuire, Michael
Rose, Paul B.


George, Lady Megan L'oyd
Mclnnes, James
Ross, Rt. Hn. William


Ginsburg, David
McKay, Mrs. Margaret
Rowland, Christopher


Gourlay, Harry
Mackenzie, Gregor (Rutherglen)
Sheldon, Robert


Greenwood, Rt. Hn. Anthony
Mackie, John (Enfield, E.)
Shore, Peter (Stepney)


Gregory, Arnold
McLeavy, Frank
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Grey, Charles
Mahon, Peter (Preston, S.)
Short, Mrs. Renée (W'hampton, N. E.)


Griffiths, David (Rother Valley)
Mahon, Simon (Bootle)
Silkin, John (Deptford)


Griffiths, Rt. Hn. James (Llanelly)
Mallalieu, J. P. W. (Huddersfield, E.)
Silkin, S.C. (Camberwell, Dulwich)


Griffiths, Will (M'chester, Exchange)
Manuel, Archie
Silverman, Julius (Aston)


Gunter, Rt. Hn. R. J.
Mapp, Charles
Silverman, Sydney (Nelson)


Hale, Leslie
Marsh, Richard
Skeffington, Arthur


Hamilton, James (Bothwell)
Mason, Roy
Slater, Mrs. Harriet (Stoke, N.)


Hamilton, William (West Fife)
Maxwell, Robert
Small, William


Hamling, William (Woolwich, W.)
Mayhew, Christopher
Snow, Julian


Hannan, William
Mellish, Robert
Soskice, Rt. Hn. Sir Frank


Harper, Joseph
Mendelson, J. J.
Spriggs, Leslie


Harrison, Walter (Wakefield)
Mikardo, Ian
Steele, Thomas (Dunbartonshire, W.)


Hart, Mrs. Judith
Millan, Bruce
Stewart, Rt. Hn. Michael


Hattersley, Roy
Miller, Dr. M. S.
Stonehouse, John


Hazell, Bert
Milne, Edward (Blyth)
Stones, William


Healey, Rt. Hn. Denis
Molloy, William
Strauss, Rt. Hn. G. R. (Vauxhall)


Heffer, Eric S.
Monslow, Walter
Summerskill, Hn. Dr. Shirley


Henderson, Rt. Hn. Arthur
Morris Alfred (Wythenshawe)
Swain, Thomas


Herbison, Rt. Hn. Margaret
Morris, Charles (Openshaw)
Swingler, Stephen


Hobden, Dennis (Brighton, K'town)
Morris, John (Aberavon)
Symonds, J. B.


Holman, Percy
Mulley, Rt. Hn. Frederick (Sheffield Pk)
Taverne, Dick


Horner, John
Murray, Albert
Taylor, Bernard (Mansfield)


Houghton, Rt. Hn. Douglas
Neal, Harold
Thomas, George (Cardiff, W.)


Howarth, Harry (Wellingborough)
Newens, Stan
Thomas, Iorwerth (Rhondda, W.)


Howarth, Robert L. (Bolton, E.)
Noel-Baker, Francis (Swindon)
Thomson, George (Dundee, E.)


Howell, Denis (Small Heath)
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Thornton, Ernest


Howie, W.
Norwood, Christopher
Tinn, James


Hoy, James
Oakes, Gordon
Tomney, Frank


Hughes, Cledwyn (Anglesey)
Ogden, Eric
Tuck, Raphael


Hughes, Emrys (S. Ayrshire)
O'Malley, Brian
Urwin, T. W.


Hughes, Hector (Aberdeen, N.)
Oram, Albert E. (E. Ham, S.)
Varley, Eric G.


Hunter, Adam (Dunfermline)
Orbach, Maurice
Wainwright, Edwin


Hunter, A. E. (Feltham)
Orme, Stanley
Walden, Brian (All Saints)


Hynd, H. (Accrington)
Oswald, Thomas
Walker, Harold (Doncaster)


Irving, Sydney (Dartford)
Owen, Will
Wallace, George


Jackson, Colin




Janner, Sir Barnett
Page, Derek (King's Lynn)
Watkins, Tudor


Jay, Rt. Hn. Douglas
Paget, R. T.
Weitzman, David


Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Palmer, Arthur
Wells, William (Walsall, N.)


Jenkins, Hugh (Putney)
Pannell, Rt. Hn. Charles
White, Mrs. Eirene


Johnson, Carol (Lewisham, S.)
Pargiter, G. A.
Whitlock, William


Johnson, James (K'ston-on-Hull, W.)
Park, Trevor (Derbyshire, S.E.)
Wigg, Rt. Hn. George


Jones, Dan (Burnley)
Parkin, B. T.
Wilkins, W. A.


Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Pavitt, Laurence
Willey, Rt. Hn. Frederick


Jones, J. Idwal (Wrexham)
Pearson, Arthur (Pontypridd)
Williams, Alan (Swansea, W.)


Jones, T. W. (Merioneth)
Peart, Rt. Hn. Fred
Williams, Clifford (Abertillery)


Kelley, Richard
Pentland, Norman
Williams, Mrs. Shirley (Hitchin)


Kenyon, Clifford
Perry, Ernest G.
Williams, W. T. (Warrington)


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Popplewell, Ernest
Willis, George (Edinburgh, E.)


Kerr, Dr. David (W'worth, Central)
Prentice, R. E.
Wilson, Rt. Hn. Harold (Huyton)


Lawson, George
Price, J. T. (Westhoughton)
Wilson, William (Coventry, S.)


Leadbitter, Ted
Probert, Arthur
Winterbottom, R. E.


Ledger, Ron
Pursey, Cmdr. Harry
Woodburn, Rt. Hn. A.


Lee, Rt. Hn. Frederick (Newton)
Randall, Harry
Woof, Robert


Lee, Miss Jennie (Cannock)
Rankin, John
Wyatt, Woodrow


Lever, Harold (Cheetham)
Redhead, Edward
Yates, Victor (Ladywood)


Lever, L. M. (Ardwick)
Rees, Merlyn
Zilliacus, K.


Lewis, Arthur (West Ham, N.)
Rhodes, Geoffrey



Lewis, Ron (Carlisle)
Richards, Ivor
TELLERS FOR THE NOES:


Lipton, Marcus
Roberts, Albert (Normanton)
Mr. John McCann and


Loughlin, Charles
Roberts, Goronwy (Caernarvon)
Mr. Alan Fitch.


Mabon, Dr. J. Dickson
Robertson, John (Paisley)

Mr. MacDermot: I beg to move, Amendment No. 58, in page 28, line 35 at the end to insert:
(5) A gain shall not be a chargeable gain if accruing on the disposal by any person of a decoration awarded for valour or gallant conduct which he acquired otherwise than for consideration in moneys or money's worth.
This does the same in respect of the long-term tax as Amendment No. 12, which we have already passed, does in relation to short-term tax.

Sir D. Glover: Sir D. Glover
rose—

Hon. Members: Hear, hear.

Sir D. Glover: I am so glad that the House unanimously applauds by intervention, particularly as on this occasion, for about the first time during our proceedings on the Bill, I rise to thank the Financial Secretary. I thank him for the help which he gave me as the hon. Member who moved an Amendment in Committee and to say that the hon. and learned Gentleman's Amendment is far better than the one which I then moved.
I apologise to the hon. and learned Gentleman for not being here earlier when he moved the other Amendment. I was attending a conference under the chairmanship of Mr. Speaker. If I could have been present, I should have been glad to pay my tribute then. I am very grateful for what has been done. This is a small cloud of wisdom coming into the Government's handling of affairs. [An. HON. MEMBER: "Do not spoil it".] I shall not spoil it. Even from me the Government can learn wisdom, and in this case they have done. I am certain that no one in the House wanted the Capital Gains Tax to be applied to decoration of this sort, and the point only needed to be drawn to the attention of the Treasury for it to be dealt with. It is a small item, and I am grateful to the Minister for accepting my Amendment in the way he has.

Amendment agreed to.

Clause 28.—(PRIVATE RESIDENCES.)

Mr. Deputy-Speaker (Dr. Horace King): The next Amendment selected is No. 61. Amendment No. 60, in page 30, line 20, at the end to insert:
or except for any time during which he has been unable to occupy the residence solely by

reason of the terms and conditions of his employment
is not selected, but may be discussed with Amendment No. 61.

Mr. MacDermot: I beg to move Amendment No. 61, in page 30, line 30, to leave out subsection (4) and to insert:
(4) For the purposes of subsections (2) and (3) of this section—

(a) a period of absence not exceeding three years (or periods of absence which together did not exceed three years), and in addition
(b)any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the United Kingdom, and in addition
(c) any period of absence not exceeding four years (or periods of absence which together did not exceed four years) throughout which the individual was prevented from residing in the dwelling-house or part of the dwelling-house in consequence of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to reside elsewhere, being a condition reasonably imposed to secure the effective performance by the employee of his duties,

shall be treated as if in that period of absence the dwelling-house or the part of the dwelling-house was the individual's only or main residence if both before and after the period there was a time when the dwelling-house was the individuals only or main residence.
In this subsection "period of absence" means a period during which the dwelling-house or the part of the dwelling-house was not the individual's only or main residence and throughout which he had no residence or main residence eligible for relief under this section.
This Amendment honours an undertaking given in a debate raised in Committee by an Amendment put down by my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman). It extends the period for which a person may be absent from his residence and still enjoy exemption from liability to Capital Gains Tax in respect of that residence. The Amendment falls into two parts. The first deals with the case of the person absent abroad by reason of employment abroad, and the second deals with the person absent by reason of employment in some other part of the United Kingdom.
The Amendment has a threefold effect. First, it proposes that there shall be ignored in determining whether or not the house has been occupied throughout as a principal private residence any period or periods of absence not exceeding three years in total, without any conditions at


all. That reproduces what is already in the Bill. Second, and in addition, it proposes to ignore any period of absence throughout which the individual worked in an employment or office of which all the duties were performed outside the United Kingdom. Third, and also in addition, it proposes similarly to ignore any period of absence not exceeding four years, that is, four years on top of the basic three and whether at one time or as a total of separate years, during which the individual could not live in his house either because of the situation of his place of work or in consequence of any condition imposed by his employer requiring him to live elsewhere, that condition being one reasonably imposed in order to secure that the individual could effectively discharge the duties of the employment.
All these periods of absence are subject to one general condition, that before the period of absence and after it the house in question has to be occupied by the individual as his principle private residence. The conditions are aimed generally at trying to provide for the genuine case of the person who has bought a house as his own residence but, because of the nature of his employment, has not been able to live in it for quite prolonged periods, but they are framed in such a way as not to open the door to widespread abuse of what, I think, has been recognised to be an extremely favourable exemption given to the householder.

Mr. Chapman: I do not understand the condition of having to reside in the house before and after. The whole point is that he will not reside in it afterwards. He will have decided to sell the house. If a man is a resident keeper of a children's home and he has to live on the premises, keeping his own house for a while and then deciding to sell it, there will be no afterwards in which he goes back to live there. So the concession is meaningless for him.

Mr. MacDermot: The man must decide in this situation. If he takes an employment which will lead to his permanently wanting to give up the house, then he can sell the house at that stage and enjoy the benefit of the exemption. But if he intends to return to live in it, he can be

away from it for periods of years in total and still enjoy the exemption.
With regard to the case of the man who goes overseas, I have taken advice on the point raised in an Amendment tabled by the hon. Member for Barkston Ash (Mr. Alison), and it may save time if I tell him at this stage that we are advised that the terms of the new subsection (4, b) are wide enough to cover any period during which such an individual may visit this country either on leave or for purposes incidental to his employment, and he will still be entitled to the benefit of the exemption even though during those periods he does not occupy the house which he owns.

Mr. Maxwell-Hyslop: I am doubtful about the accuracy of what the hon. and learned Gentleman says because of the words:
all the duties of which are performed outside the United Kingdom".
If the man returns to this country on duty for a meeting, by definition all the duties are not being performed outside the United Kingdom. Would not paragraph (b) then fall?

Mr. MacDermot: I am assured that the same point arises under the Income Tax Acts under Schedule E where it is necessary to determine whether the duties of an office or employment are performed outside the United Kingdom, and it has been determined for that purpose that visits of the kind that I have indicated are not regarded as being the perfomance of duties within the United Kingdom, and the same construction and interpretation will be applied to the Amendment.

Mr. Maxwell-Hyslop: But the hon. and learned Gentleman quoted from the Income Tax law the phrase "the duties", not "all the duties". I am questioning the drafting of the Amendment—"all the duties". "All" is totally embracing. One cannot have an exception to "all" and still include the word "all".

Sir D. Glover: Sir D. Glover rose—

Hon. Members: Answer.

Mr. Deputy-Speaker: Is the hon. and learned Gentleman proposing to reply to the hon. Member for Tiverton (Mr. Maxwell-Hyslop)?

Mr. MacDermot: The hon. Member for Ormskirk (Sir D. Glover) rose and I thought I might answer the two hon. Gentlemen together later.

Sir D. Glover: I should like to put a question to the hon. and learned Gentleman on the point raised by the hon. Member for Birmingham, Northfield (Mr. Chapman) about the occupation of the residence on the person's return. I understand that if he comes home and decides then to take a job and sells his house, it is all right. But suppose that he decides when he is overseas that he will take a job and decides before he comes home to sell the house. Is the man covered by this provision? I do not think he is.

Mr. Chapman: Yes, he is.

Mr. Alison: I thank the Financial Secretary for his reassurance on my Amendment to the Chancellor's proposed Amendment. Mine was meant to be a probing Amendment. It is satisfactory if we can understand that the temporary termination of a period of absence does not imply termination of the period of absence in the full legal sense. On that assurance, I shall not press my Amendment.
With regard to our Amendment No. 60 in respect of extending this general principle of definition to the appropriate place in the original Bill, it simply seeks to reinterpret the concept of the period of the ownership or residence of the house which entitles one to escape Capital Gains Tax. It seeks to reinterpret it within the principle of a period of absence which is now held under the Amendment to be co-terminous with a period of ownership. I hope, therefore, that he would be happy to accept that Amendment. May I ask his views on that?

10.45 p.m.

Mr. Maxwell-Hyslop: On a point of order. I was under the impression that I intervened in the Financial Secretary's speech. Are we now at liberty to catch your eye, Mr. Deputy-Speaker, while we are waiting for the hon. and learned Gentleman to continue his speech?

Mr. Deputy-Speaker: I was at first under the same impression as the hon. Member, but what the hon. Member did was to intervene at the end of the

Financial Secretary's speech and, unfortunately, he forfeited his right to speak, because an hon. Member may speak only once to a Question on Report, unless he gets the leave of the House to speak again. It is possible the hon. Member may get the leave of the House. I do not know.

Sir D. Glover: On a point of order. I think it will be in the recollection of the House that the Financial Secretary said he was going to wait to reply to all the points, and that he did not indicate that he had terminated his speech.

Mr. Deputy-Speaker: That was my impression, too, but I must judge by what actually happened, and the Financial Secretary made no attempt to continue his speech, so that since then we have had two speeches, interventions.

Mr. Chapman: My hon. and learned Friend very kindly said he was moving the Amendment in response to one I moved in Committee. I should simply like to thank him very much indeed for trying to meet the points I raised at that time. Although the situation is extremely complicated, especially when we are trying to revoke a very complicated subsection and to substitute for it another very complicated one, the net effect, as I understand it, of the whole complication comes to this, that practically all the cases I raised in Committee are now satisfactorily dealt with, or will be when this Amendment is made to this Clause. So although I cannot follow in precise detail every one of the satisfactions which have, apparently, by this Amendment, been accorded to me, I nevertheless express my thanks, and I shall try in the years to come to understand how this is so. I am very grateful to my hon. and learned Friend.

Mr. Maxwell-Hyslop: May I ask leave to put a further point?

Mr. Deputy-Speaker: If leave is given by the House.

Hon. Members: Go on.

Mr. Maxwell-Hyslop: The second point which I wanted to raise is, what would happen in the case where somebody comes back from abroad and wants to reoccupy the house but cannot do so because, by reason of congestion in the


courts, the decision giving recovery of access and ability to occupy the house is delayed so long that it comes outside the sever-year period? This is a very real point. The hon. and learned Gentleman the Financial Secretary will know far better than I of the delays in the county courts or the High Court to which it may be necessary to go in the near future, and it may well be that a person coming back from abroad cannot reoccupy his own house within the seven-year period because of the delays which are not due to defective intent on his part or lack of good faith on his part but just to the queue in the process of the courts. We should be most grateful if we could have a specific answer to that, and also to my earlier point.
I do not see how it can be claimed that paragraph (b) in the proposed new subsection meets it. It says specifically
all the duties of which were performed outside the United Kingdom.
If some of the duties are performed inside the United Kingdom, my reading of it, as a non-lawyer—and, funnily enough, the courts interpret the law as a non-lawyer would interpret it, that is to say, as it actually reads, more often than lawyers in this House do—is that by visiting the United Kingdom once on duty one immediately deprives oneself of the benefit of paragraph (b). We would be grateful if the hon. and learned Gentleman would advise us on these points.

Sir Edward Brown: I should like to congratulate the Chancellor upon the Amendment because it does a great deal to relieve problems in my constituency, wherein I have a number of Admiralty servants who from time to time go overseas.
I come back to the point about the word "all," because when these Admiralty people return from overseas they will not necessarily come back to the base. They will probably be posted somewhere else for three or four months before they come back to the home base. The inclusion of the word "all" seems to make all the difference in the world, and I should like the hon. and learned Gentleman to reconsider the position, because under the terms of the Amendment a man will suffer a disqualification if on returning from Africa he is posted to, say,

Portsmouth for three or four months instead of returning direct to his home base.
I go on to the point raised by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) about obtaining possession of the house, and the danger of the seven-year period. The Minister of Housing and Local Government has recently introduced a Bill which cuts right across this Amendment. I therefore ask the Financial Secretary to refer the Amendment to his right hon. Friend so that he can make some regulations covering the people to whom I have referred.

Mr. MacDermot: With your leave, Mr. Deputy-Speaker, and that of the House, I should like to answer the questions which have been put to me. My answer to the hon. Member for Tiverton (Mr. Maxwell-Hyslop) remains the same as before. The only reason why I delayed answering was that the hon. Gentleman asked me the same question twice within a minute or two, so I thought that I would seek further advice before repeating the answer which I had already given. I am in a position to inform the House that the word "all" makes no difference. The simple reason is that if the courts construe the words
duties performed outside the United Kingdom
to include a visit to this country, a visit on leave from service abroad, or a visit for the purposes of that employment, a temporary visit back to the head office, or something of that kind, the word "all" makes no difference because those continue to be embraced in the words
duties performed outside the United Kingdom".
The second point which the hon. Gentleman raised, and it was also raised by the hon. Member for Bath (Sir E. Brown), concerned the position of the person who goes abroad and then, for one reason or another, there is some delay when he returns before he gets possession of his house. One suggestion was that there might be delay in getting possession through the county court, and the other was that he might be posted to some other place for a few months. I think that hon. Gentlemen have failed to realise that in the case of the person who serves abroad there is no time limit. The seven-year period does not apply to him. It does not


matter how long he is away, provided that it is the result of the visit abroad. There is a provision in the Bill covering that.
In the case of a person who is away from his own home in connection with employment in some other part of the United Kingdom where the seven-year period applies, my answer is that when an owner wants to recover possession for his own occupation he does so under the terms of the Rent Act. I am assured, and I think that the assurance has been given to the House, that the Lord Chancellor is taking steps to see that the delays which have been occurring in the county courts are shortened and that the procedure is speeded up.
A person who is seeking to take advantage of the provisions of the Bill and who is intending to recover possession must take the necessary steps to set in motion proceedings for recovery so as to recover possession within that period, and, knowing county court judges, I should have thought that the factor that he was required to recover possession within the seven-year period would be borne very much in mind in deciding whether or not it was reasonable to grant an order for possession.

Mr. Graham Page: This is a very real point. I was going to interrupt the Financial Secretary on it, but now that he has sat down I ought to make the point by way of a short speech. There is a grave possibility of delay, perhaps just at the end of the seven-year period. The Financial Secretary said that his noble Friend the Lord Chancellor had seen to this, but there has been six months since the Protection from Eviction Act, when we were promised that something would be done about remedying the delays in the courts, and nothing has yet been done. Now, the information that we are receiving from the county courts is that even when expedition is applied it is taking three or four weeks to get matters before the court. It may be just at the end of this seven years that a man is delayed for two or three months in getting possession.
In the Amendment the only delay that is taken into account is that which arises by reason of a person's work, or some requirement of his employment. There is no provision for the unfortunate man

who is delayed in getting possession of his dwelling. This matter should be dealt with, either by taking some real steps, which the Government have not yet taken, to hasten possession proceedings in the courts, or else by eventually amending the Clause.
The Government may well have dealt with this matter had they accepted an anticipatory possession summons form of procedure, but they have discarded this in connection with another Measure. It would have been a help if it had been laid down in this Bill. I hope that the hon. and learned Member will reconsider the question.

Mr. Alison: Mr. Alison rose—

Mr. Deputy-Speaker: Order. The hon. Member has addressed the House on Report. He has exhausted his right to speak unless he can get leave of the House to speak again.

Mr. John Harvey: I do not want to detain the House on what may be a technicality. I want to revert to the word "all". My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) was right in saying that the courts sometimes tend to take the simplest views of these matters. Let us suppose that a manager working abroad for a British firm comes home periodically to report on the job he is doing. If we turned the argument upside down, and this manager for some reason or other wanted to prove that he had performed some duty in this country by coming here to report, I would think that he would probably be able to do that. If the Financial Secretary says that this form of words has been quite acceptable up to now in Income Tax law we can accept it, but it might still not be a bad thing if the hon. and learned Gentleman were to ask the Treasury Solicitor to look at the form of words to see whether, to safeguard all concerned, it should be tightened up a little. We should try to make these things mean what they say when they leave this House.

Mr. Alison: If I may speak again, with the leave of the House—

Hon Members: No.

Mr. Deputy-Speaker: The hon. Member has not the leave of the House.

Mr. Hirst: I am not very clear about this. I apologise to the hon. and learned Member; I admit that this Clause is not one of the parts of the Bill that I understand very clearly—some of which I have studied most carefully—but I cannot understand the point that he made in his speech. It may be that the seven-years' period does not apply in the case of anyone who has been on duty abroad, but I should be grateful to have some elucidation of the position, because I am not alone on these benches in feeling that there is some lack of clarity on the matter.

11.0 p.m.

Sir D. Glover: I do not know whether I have any right to speak again, but when I spoke before I thought that I was intervening—

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish): No, you have not.

Mr. Deputy-Speaker: Order. There is only room in the House for one Chairman—

Hon. Members: Hear, hear.

Mr. Deputy-Speaker: Order. I am afraid that the hon. Member for Ormskirk (Sir D. Glover) has addressed the House. I think he thought that he was making an intervention. I was a little doubtful myself at the time. If he can get leave of the House, he can speak again.

Sir D. Glover: If I may have leave of the House—

Hon. Members: No.

Sir D. Glover: I only want one minute—

Hon. Members: No.

Mr. Deputy-Speaker: Order. I hope that the hon. Gentleman would have leave of the House. This was a clear misunderstanding.

Sir D. Glover: Thank you for your ruling, Mr. Deputy-Speaker, and I thank the House for its courtesy.
I want—with the leave from the House—to refer once again to the word "all". I understand what the hon. and learned Gentleman said about someone

who is stationed overseas for a term and comes home on the duty of his responsibility overseas. In other words, as soon as he comes back to this country on a buying mission for the subsidiary overseas, this could generally be said to be part of his service overseas, and he is therefore, performing his duties overseas. But suppose that he was called home by the firm because they had a new process and he therefore spent three months in this country learning the process. There might have been a new invention in the firm and he might have been called home to learn about it. I do not think that the courts would rule that this was part of his service overseas. It would be part of his continuing service with that firm, which might be 25 years' service in this country and four years' service overseas.
The hon. and learned Gentleman ought to have another look at this, because I am not sure that the inclusion of the word "all" does not mean that there are loopholes.

Mr. MacDermot: If I have your leave, Mr. Deputy-Speaker, and that of the House, I will answer—for, I think, the third time—precisely the same point. All I can do is repeat the assurance given. We are at the Report stage and nothing can be done now by way of further Amendment. Either the House wishes to accept the Amendment or it wishes to reject it. Having had many questions fired at me on detailed points of interpretation, I have given what I hope is a satisfactory general assurance. If hon. Members want any particular points of construction dealt with in any detail, I must ask them to write to me and allow me to get advice after the matters have been considered with the detailed consideration which would be required. All that I can do at this stage is to state general principles.
The one on which the Revenue will act is that where a person who qualifies under the Amendment and who is serving abroad comes to this country for a visit which is incidental to his employment that will not debar him from relief. Whether or not that would apply to a training course, I would imagine—though it is not for me to decide—that if this course is to enable him to do his job properly overseas that would be treated


as being incidental. That is the kind of detailed point on which I should be glad to write to hon. Members—

Sir E. Brown: Sir E. Brown rose—

Mr. MacDermot: Hon. Members need have no fears on this score. I think that I have misled the House about the courts in saying that this interpretation was given by the courts. This is the interpretation given by the Revenue in construing the similar point which arises under Schedule E. I am not aware of its having led to any court cases and I hope that the same would apply here, that the Revenue would approach this in a reasonable spirit.

Sir E. Brown: The point which I was trying to elucidate was the question of a man posted to Africa for service, who spent a considerable time—two or 2½ years—there and was posted back to this country but not back to the base. He spent six months in this country, returned to the other post and finally came back to the base. I am certain that the Income Tax authorities would say that his service had been broken and he was resident in this country and working here for that six months before he came back to the home base. This is the real point.

Mr. MacDermot: The hon. Member need have no fears. All these periods are cumulative. He can go off overseas for as long as he likes and that will not affect his rights. He can have his basic three years in this country, for whatever purpose. In addition, he may have four years within this country connected with his employment. With all the combinations of circumstances which the hon. Member envisages, he would still be covered. I hope that the House will accept the Amendment.

Amendment agreed to.

Clause 28.—(PRIVATE RESIDENCES.)

Mr. MacDermot: I beg to move, Amendment No. 62, in page 32, line 17, at the end to insert:
(10) If as respects a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house which is, or has at any time in his period of ownership been, the sole residence of a dependent relative of the individual, provided rent-free and without any other consideration, the individual so claims, such relief shall be given in respect of it and

its garden or grounds as would be given under this section, if the dwelling house (or part of the dwelling-house) had been the individual's only or main residence in the period of residence by the dependent relative, and shall be so given in addition to any relief available under this section apart from this subsection:
Provided that—

(a) not more than one dwelling-house (or part of a dwelling-house) may qualify for relief as being the residence of a dependent relative of the claimant at any one time nor, in the case of a man and his wife livng with him, as being the residence of a dependent relative of the claimant or of the claimant's husband or wife at any one time, and
(b) the inspector, before allowing a claim may require the claimant to show that the giving of the relief claimed will not under proviso (a) above preclude the giving of relief to the claimant's wife or husband or that a claim to any such relief has been relinquished.

In this subsection "dependent relative" means, in relation to an individual, a relative of the individual, or of his or her wife or husband, who is incapacitated by old age or infirmity from maintaining himself, or the mother of the individual or of his or her wife or husband, if the mother is widowed, or living apart from her husband, or, in consequence of dissolution or annulment of marriage, a single woman.

Mr. Deputy-Speaker: It is proposed that with this Amendment we should take Amendment No. 63. I understand from Mr. Speaker that there may be a Division on No. 63 if required. Amendment No. 63 is in page 32, line 17, at the end to insert:
(10) This section shall also apply in relation to a gain accruing to an individual on a disposal of, or an interest in—

(a) a dwelling-house or part of a dwelling-house which is or has at any time during the period of his ownership been the only or main residence of a dependent relative of his, or
(b) land which he has for the occupation and enjoyment of the dependent relative with that residence as its garden or grounds up to an area (inclusive of the site of the dwelling-house) of one acre as it would apply if neither the individual nor the wife or husband of the individual occupied any other residence and the occupation of his dependent relative had been his occupation.

In this subsection, "dependent relative" means a relative of the individual or of the wife or husband of the individual who is incapacitated by old age or infirmity from maintaining himself, or the widowed mother, whether incapacitated or not, of the individual or of the wife or husband of the individual.
(11) The exemption contained in the last preceding subsection will not apply to a gain accruing to an individual on the disposal of or an interest in more than one dwelling-house or part of a dwelling-house.

Mr. MacDermot: This Amendment implements an undertaking which I gave in Committee that we should introduce an Amendment to extend the owner-occupier's exemption for his permanent place of residence to include a residence which he provides for a dependent relative. May I point out to the Committee one or two points about the form of the Amendment which we are proposing?
First of all, we propose that it should be a condition of the relief that the dependent relative must occupy the house rent-free without paying any other consideration. What we have in mind is the case of somebody who is providing a house for an impecunious or dependent relative, and it is not intended to apply to something which is let on a commercial basis.
Secondly, if the other conditions are satisfied the house is to be treated as if the dependent relative's occupation of it had been the owner's occupation of it as a principal private residence. As a consequence of this, various tolerances which apply in Clause 28 to his own house will also apply to the other house. For example, the 12-month period provided by subsection (2) to allow the house to be sold after the owner has moved out of occupation will also apply for the benefit of the owner in the case of the dependent relative's house. Equally, the three-year tolerance for the period of absence will apply; if the dependent relative is ill and has to go into hospital for a prolonged period, this will not deprive him of his rights.
Thirdly, as I suggested in Committee, only one dependent relative's house can qualify at any one period of time. We have framed the provision so that it could apply to more than one house in sequence but only to one at any particular time.
Finally, we have given a wide definition to the term "dependent relative"—somewhat wider than the dependent relative allowance definition. Apart from individuals who are incapacitated by old age or infirmity from maintaining themselves, the definition also includes the mother of the individual if widowed or separated or divorced and whether or not she is incapacitated. That goes slightly

further than the original proposal, but I hope that it is an extension which will commend itself to the House.

Mr. John Hall: The Amendment does, as the hon. and learned Gentleman said, give effect to a promise made during the Committee stage of the Bill in reply to an Amendment moved from this side. Our Amendment No. 63 was put down really to protect the position, but we have no intention of pressing it. Although one might have different views as to the best way of achieving this object, we would accept the Government Amendment as it stands.
As the hon. and learned Gentleman said during the Committee stage, it is an illogical addition to the Bill, but then, of course, the Income Tax Act is sometimes improved by a few illogical humanities being put into it. We are delighted that the hon. and learned Gentleman has given effect to what he promised and expanded it slightly.

Amendment agreed to.

Clause 29.—(CHATTELS SOLD FOR £1,000 OR LESS.)

Amendments made: In page 33, line 18, leave out "forming" and insert "which have formed".

In line 19, after "description" insert:
all owned at one time by one person".

In line 19, leave out "the same" and insert "that".

In line 34, leave out from "property" to end of line 36 and insert:

(a) in the first instance subsections (1), (2) and (3) of this section shall be applied in relation to the asset as a whole, taking the consideration as including the market value of what remains undisposed of, in addition to the actual consideration,
(b) where the sum of the actual consideration and that market value exceeds one thousand pounds, the limitation on the amount of tax in subsection (2) of this section shall be to half the difference between that sum and one thousand pounds multiplied by the fraction equal to the actual consideration divided by the said sum, and
(c) where that sum is less than one thousand pounds any loss shall he restricted under subsection (3) of this section by deeming the consideration to be the actual consideration plus the said fraction of the difference between the said sum and one thousand pounds.—[Mr. MacDermot.]

Clause 30.—(WORKS OF ART, ETC.)

Amendments made: In page 34, line 26, leave out from "trustee" to "on" in line 28.

In page 34, line 28, at end insert "section 24(3) or".—[Mr. MacDermot.]

Clause 31.—(REPLACEMENT OF BUSINESS ASSETS.)

Mr. MacDermot: I beg to move, in page 38, line 9, at end insert:

Class 4

Goodwill.

Would it be convenient to discuss with this Amendment the next three Amendments, No. 71, No. 72 and No. 73, which all deal with amendments to provisions in Clause 31 relating to the transfer of business assets?

Mr. Deputy-Speaker (Sir Samuel Storey): Amendment No. 71 is already selected for discussion with Amendments No. 310, No. 311 and No. 74.

Mr. MacDermot: This Amendment again flows from our discussions in Committee when I was pressed by hon. Member's on both sides of the House to extend the class of assets which are entitled to the benefit of deferment from liability to capital gains on the transfer of the business to include goodwill.
This affects a number of people for whom hon. Member's were concerned. It included in particular small shopkeepers, and it included insurance agents with their special problem relating to their agent's books. We looked at this problem and decided that there was no solution to it short of a general provision to create a new class of asset which would qualify for this deferment relief, a comprehensive class of asset constituting goodwill. That is what we have done in this Amendment. It will, I think, include all the types of cases which hon. Member's had in mind during our discussion in Committee, and I hope it will commend itself to the House.

11.15 p.m.

Mr. Peter Walker: I apologise for not being in my place when the Financial Secretary moved the Amendment, which, of course, my hon. Friends and I obviously welcome. We are delighted to see the Amendment in its entirety,

every word of it, as originally proposed in Committee by my hon. Friends. We are delighted at the rapid conversion not just of the Financial Secretary but of all those hon. Gentlemen opposite who trundled into the Division Lobby to oppose the Amendment when it was first proposed in Committee. Not only did hon. Gentlemen opposite trundle into the Lobby to oppose it, they were led in by the right hon. Gentleman the Prime Minister.
As I say, we welcome the conversion of hon. Gentlemen opposite. That applies not only to the Financial Secretary and the other Members of the Treasury Bench but seemingly the whole of the Parliamentary Labour Party. Thirty-six days ago hon. Gentlemen opposite decided that this was a bad Amendment. Thirty-six days later they all, every one of them, accept that it is a good Amendment.

Mr. MacDermot: If the hon. Gentleman wishes to be up to his usual standards of fairness he might care to recollect that we did not say that it was a bad Amendment but that we wanted to consider the matter. On that occasion hon. Gentlemen opposite were so impatient that they did not want to allow us time in which to consider it.

Mr. Walker: It would not be fair to the hon. and learned Gentleman to suggest that he did not put any arguments against the Amendment. He put some cogent arguments, although I am sure he will agree that one could not argue that it was a complicated Amendment or that it contained a great deal of complicated legal wording which had to be further considered with the Treasury lawyers. After all, so reasonable was it that it merely sought to insert the word "Goodwill".
The Amendment was on the Order Paper for several weeks before it came before the Committee. Yet at the end of the consideration which the Financial Secretary must have given to it, he told the Committee—having given various reasons why goodwill of this sort should be subject to the Capital Gains Tax and should not be allowed to be transferred and so on—that so difficult was goodwill to define that the Amendment should not be accepted. In spite of various hon. Gentlemen opposite pointing out that the hon. and learned Gentleman had nothing


to lose in accepting the Amendment, he recommended the Committee not to accept it. Fortunately, on behalf of those concerned we decided to press the matter to a division.
It is remarkable that within only 36 days, presumably without there having been a general distribution throughout the Parliamentary Labour Party of the arguments which have changed the mind of the Financial Secretary, there has been a mass conversion on the benches opposite. It is surprising that of the scores of hon. Gentlemen opposite who voted against the Amendment, not one has come forward still retaining his original view about it. Not even the Prime Minister has come along to express his view about it, although it would be a refreshing change to see the right hon. Gentleman here during our deliberations on this so-called reforming Finance Bill.
This is an important Amendment. Had it not been included it would have meant that many small business people throughout the country, on transferring from one location to another, would have been considerably penalised for the goodwill which they had established in their previous businesses. It would also have meant that many hundreds of insurance agents would have been caught fully by the Capital Gains Tax provisions. We are, therefore, pleased that within the short period of a month we have achieved the complete conversion of the party opposite so that the Government have moved the Amendment.

Amendment agreed to.

Mr. Peter Walker: I beg to move Amendment No. 125, in page 38, line 9, after the words last inserted, to insert "Class 4. Sportsmen."
This very simple and straightforward Amendment relates to the transfer fees of football players. We presume that if at certain times certain football clubs obtain transfer fees on a football player they would have to pay Gapital Gains Tax on them but if a club then spent the money on purchasing another player it would be an obvious case of transfer of a business asset. Therefore, in the interests of the football clubs, and with the Minister of Sport enthusiastically supporting the Amendment, as we are quite sure he is, I am certain that I have only to

sit down for the Financial Secretary to accept the Amendment.

Mr. MacDermot: I always thought that hon. Members opposite had a tendency to a somewhat feudal outlook, but I see that on this occasion they have gone even further and have got the slave mentality. They seem to think that a footballer is the property of the football club. [HON. MEMBERS: "So he is."] I can assure them that that is not so. The footballer is not an asset. His ownership is not vested in the football club. What the football club has is a contractual right to certain of his services on the football field. I am afraid, therefore, that the Amendment is meaningless, which is the first reason—which hon. Members opposite will no doubt find a somewhat technical argument—for my rejecting the Amendment.
Perhaps I may be allowed now to address myself to what I conceive to be the meaning they intended to convey. In all the cases where we have been able to check, the cost of the so-called "buying" of the player—and this applies in cricket as well—is treated as an expense in computing the profits, if such there be, of the club, and receipts are included in profits, so that the whole transaction is outside the scope of the Capital Gains Tax. For that additional reason, I hope that hon. Members will not find it necessary to press their Amendment to a Division.

Mr. Peter Walker: We have made inquiries into this aspect, and I gather that the situation could arise in which this fee would not be treated as a revenue item but could be treated as a capital item. Would the hon. and learned Gentleman care to comment on the supposition that with certain clubs these contractual rights could be counted for accountancy purposes? I gather that that particularly applies to a club in, perhaps, the Southern League that seldom transfers players, or an amateur club that does not make a custom of transferring players, and that the fee could become a capital payment in some circumstances.
I think I heard the Minister for Sport briefing the hon. and learned Financial Secretary on this point, but I am not talking of amateur clubs. In the Southern League there are professional clubs which only occasionally dispose of a player, and very seldom buy one. I gather that,


occasionally, such a transfer fee could be treated as a capital item. I should have thought that, by the nature of Clause 31, if the money was expended on another player, the Minister would not wish to tax it, but if he suggests that this would become a capital item, perhaps the interpretation of Amendment No. 70 could be so extended as to cover this point.

Sir D. Glover: I intervene on this Amendment because I hope that the Government are right in their interpretation. I happen to be the chairman of the anti-slavery society and take a very strong view of the suggestion that a football club has a title or lien on the body of a player. I understood that when a club buys a player it buys his ability as a footballer and does not buy anything else. Therefore, the club is buying only his particular skill and not creating any form of slavery and has no right to any other activity than football in the transfer fee. I think the Financial Secretary expressed what I understood the position to be. I shall be grateful for confirmation so that I shall not have to start a campaign against slavery by football clubs.

Amendment negatived.

Mr. MacDermot: I beg to move Amendment No. 71, in page 38, line 27, at the end to insert:
(9) This section shall apply in relation to a person who, either successively or at the same time, carries on two trades which are in different localities, but which are concerned with goods or services of the same kind, as if, in relation to old assets used for the purposes of the one trade and new assets used for the purposes of the other trade, the two trades were the same trade.

Mr. Deputy-Speaker: We can discuss with this Amendment the Amendment to the Amendment at the end insert:
and in this respect and for all the purposes of this section agriculture, horticulture and forestry shall be held to be concerned with goods and services of the same kind.
Amendment No. 310, in page 38, leave out line 35.
Amendment No. 311, in line 36, at end insert:
and (d) in relation to the management by by the owner thereof of an estate which consists principally of agricultural land as defined in section 315 of the Income Tax Act 1952.

Amendment No. 74, in page 39, line 7, at end insert:
(12) For the purposes of this section all forms of retail sales shall be considered to be one trade.

Mr. MacDermot: May we also include Amendment No. 72, in page 38, line 36, leave out "or vocation" and insert "vocation, office or employment"; and
Amendment No. 73, in line 38, leave out "and 'vocation'" and insert "'vocation', 'office' and 'employment'."

Mr. Deputy-Speaker: If that is convenient to the House, certainly.

Mr. MacDermot: Amendment No. 71 extends the scope of the term "trade" for the purposes, and only for the purposes of Clause 31. This problem came to light as a result of a remark I make in Committee when I went rather wider than was justified. Apparently the term "trade" has a somewhat restricted meaning under the Income Tax Acts, a more restricted meaning than I appreciated at the time. For the purposes of the Revenue practice based on decided cases in Income Tax law, there is one continuing trade only if both before the disposal of the old assets and after the acquisition of new ones a person is carrying on the same kind of trade, using the same organisation and the same sources of supply and dealing with the same customers.
The difficulty which arises is that if a trader was trading in one town and then sold his shop and bought precisely the same kind of shop in another town with a different lot of customers, under existing tax law he would not be carrying on the same trade. What we have done is to extend the scope of this term solely for these purposes so that "trade" will include the carrying on of the same kind of business in a different place and with different customers.
Amendments No. 72 and 73 would have the effect that Clause 31 applies, with any necessary modifications to offices and employments, as it does to trades, professions or vocations. The specific purpose is to deal with the case of insurance agents who, while being employed persons, have the right to sell their insurance books in whole or in part with


the consent of their employers. This ensures that the goodwill provision which the House has accepted will extend to the case of the insurance agent.

Sir M. Redmayne: I speak briefly, not on the particular point made by the Financial Secretary, but on my Amendment to the Chancellor's Amendment, which I put down to try to get on the record and perhaps to correct a situation which arises from what was, of course, an unintentional misleading answer given by the Financial Secretary in the debate on the Motion that Clause 31 should stand part of the Bill, for which he apologised in a letter to my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) on 3rd July.
11.30 p.m.
On Clause 31 he had been asked whether the word "trade" included horticulture, agriculture and forestry, and in reply he said:
As I understand it, for these purposes all branches of agriculture are treated as the same. It would be all forms of farming, including horticulture and forestry. Very wide switching of activities, as it were, will still enjoy the benefit of Clause 31."—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1219.]
In his letter he admitted that this was an exaggeration of the situation, and I think it would be an advantage to put on the record some of the points that he made in that letter. He confirmed—and this is important because it has caused some misunderstanding—that both horticulture and forestry, and of course agriculture, are trades for the purposes of Clause 31 and would, therefore, qualify for the deferment of Capital Gains Tax, each in its own right. He also confirmed that it is right to say that the trade of agriculture is a very wide one and would include different types of farming. For example, dairy farming and arable farming would be exchangeable one with the other for the purposes of this Clause, and he also made the point that farming is a special case under the Income Tax Act, 1952, in that all farming carried on by any particular person or partnership or body of persons is treated as one trade, wherever it may be carried on.
All those are good points. However, in this letter to which I have referred the Financial Secretary says that farming for the purposes of this Clause

does not include horticulture or forestry, and so a person could not switch".
in reinvesting his assets—
from farming to horticulture or forestry and remain within the same trade …
for the purposes of this Clause, as he had originally suggested. He continues:
I imagine that would be very unusual for anybody in farming to wish to make such a change …
I suggest that he is quite wrong, that it is not unusual, and furthermore is likely to become even more usual that it has been.
If the hon. and learned Gentleman will refer the matter to his right hon. Friend the Minister of Agriculture or, indeed, seek any informed opinion on this subject he will find that land policy and farming policy, of any Government, is very likely to promote such switching, particularly from farming to forestry, in order to make use of land which is not of the highest quality for farming, and I think that as the years go by the policy will increasingly be to see that land which is at present farmed in too small parcels to be efficient will be given to horticulture.
I do not know if the Financial Secretary will accept the Amendment, but it is important that we should have some statement to guide us. The definition of "agriculture" in the Agricultural Holdings Act, 1948, includes horticulture. I will not quote that definition, with which I am sure he is fully familiar. Therefore, there would seem to be very little reason why agriculture and horticulture should not be interchangeable for the purpose of reinvesting under the terms of this Clause. The interchangeability of forestry is not, so far as I can find, met by any similar definition in the law as it stands, but I ask the Financial Secretary to accept that it would be a most useful act of policy that these three should be interchangeable within the sense of the Clause, and to seek some means by which this can be achieved.

Sir D. Glover: I should like to support the Amendment to the proposed Amendment for a very definite reason. In my constituency there are a lot of horticultural holdings and a lot of medium-sized farms, and the farms are getting bigger. If the Financial Secretary would tour my constituency he would realise the


narrow difference between what is known as a horticultural holding and an agricultural holding. They grow virtually the same produce. Surely in all common sense they should be grouped together, although I know that the situation is different from that in the eastern counties. The farmers in my constituency do not like me to refer to them as large horticulturists. They like to be referred to as farmers. A great many of them are carrying on virtually the same rôle. There are some agricultural holdings of three or four acres and next door there are agricultural holdings three, four or five times as big but which are carrying on the same operations. I therefore hope that the Financial Secretary will be able to accept the Amendment to his Amendment.

Mr. MacDermot: May I thank the right hon. Gentleman the Member for Rushcliffe (Sir M. Redmayne) for giving me this opportunity to correct a slip which I made during our discussions in Committee? I entirely confirm all that he has stated so carefully as the true position and I will not weary the House by repeating it. However, there is one addition that I would make to what he has said which to some extent deals with the point just made by the hon. Member for Ormskirk (Sir D. Glover). Although agriculture, horticulture and forestry are themselves different trades, a particular individual may carry on two or even three of these activities together, at the same time, as one trade, in the same way as may be done in other fields of business. If he is a trader carrying on in that way a mixed trade, he would enjoy the benefit of the Clause if he transferred and carried on again a mixed trade or one of the activities which he had been doing previously.
I have been asked if I can accept the Amendment to the proposed Amendment as it stands, but I am afraid I cannot for this reason. We will be coming to another Amendment in which we are invited to extend the provisions of Clause 31 so that, in effect, anyone carrying on one trade of any kind can transfer the assets to a completely different trade and enjoy the benefit of Clause 31. This would open up such wide possibilities of switching where investment is in the form of a business that it would lead to endless deferring

of liabilities to tax and it is one which we could not accept. The agricultural community is fortunate in having a very wide definition of the trade of agriculture which enables it to enjoy a wide degree of switching which might be denied to people in other spheres. I would remind the House that the object of this Clause is to see that the provisions of the Capital Gains Tax do not operate as a bar to the kind of redeployment of industry which we all want to see.
The right hon. Gentleman urged an economic argument in support of his Amendment and has asked me to consult with the Minister of Agriculture about this aspect of the matter. That I will gladly undertake to do, but for the reasons I have stated I cannot advise the House to accept the Amendment to the Amendment.

The Earl of Dalkeith: Amendments Nos. 310 and 311, which stand in my name, cover a point slightly different from that raised in the Amendment in the name of my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne). These Amendments might have been tabled for discussion at an earlier stage but interpretation of the Bill is not altogether easy on this point and it was only after the Committee stage that the problems involved became fully apparent. I raise this matter partly because of my interest in it, which I declare, and which I believe qualifies me to speak on it with some knowledge and conviction, and partly because my Amendments seek to put right a wrong which I believe the Government would wish to put right.
It is a fairly technical matter which I assume must have been overlooked by accident rather than intent. I have some confidence therefore that the Financial Secretary will want to accept the Amendments after hearing my brief explanation.
A great part of our small island comprises hill and marginal land. Anyone who has studied the problems of land use will surely agree that it is here that there is the greatest scope for the development and improvement of productivity to the short-term and long-term economic advantage of the country.
I am sure that the Minister of Land and Natural Resources, who was present a short while ago, and the Secretary of State for Scotland, would endorse my


submission that the land generally, and these areas in particular, could be and should be more fully developed than they are at present. A great many reports and inquiries by expert bodies as well as by politicians have urged strongly that more should be done, especially by owners of estates, to carry out further development. But the essential point, which is so often overlooked, is that the main limitation to the progress which everybody wants to see and agrees is desirable is the shortage of capital.
One does not have to look far to see the reason for this. It is that during the last 20 to 30 years—and this is particularly true of estates comprising mainly of hill and marginal land—the cost of maintenance of the fixed equipment has risen very much faster than income from rents. This means that it has been barely possible to keep pace with normal maintenance obligations, let alone carry out the improvement to and modernising of fixed equipment such as roads, bridges, drainage, river banking, flood prevention, housing, shelter plantations and all the rest. As a result, it has become in recent years the practice for the more progressive owners of estates to raise the necessary capital for this kind of modernisation and improvement by occasionally selling a farm.
In this context, contrary to the popular belief that because ordinary building land is worth and sells at between £5,000 and £20,000 an acre, all land must therefore be immensely valuable, the greater part of upland farmland has probably a market value of between £5 and £50 an acre. This means that the 50,000-acre estate which is often sneered at can well be of lesser value than a sweet shop in Bond Street and will yield a much smaller return.
11.45 p.m.
In the unfortunate absence of adequate rent income on an estate, the practice of selling a farm in order to raise improvement capital is one which all progressive-minded people would surely wish to encourage. The Bill as it stands will do exactly the reverse, actively encouraging bad estate management instead of good. Not only will it deter an owner from selling a farm for the specific reasons I have given and thus slow down the process of improvement investment but it will be

an incitement to him to hold on to farms which he might otherwise sell and milk them of their natural capital appreciation by neglecting his maintenance obligations and extracting maximum rents. This will be bad for the farming community and the country as a whole, and it will slow down the trend towards an increasing proportion of owner-occupation in farming, a trend which, I had thought, hon. Members opposite wished particularly to encourage.
I am sure that these consequences are not deliberately intended by the Government. It seems illogical to defer payment of Capital Gains Tax when the proceeds of a farm sale are reinvested in another farm but not to do so when the proceeds are used for good estate management by investing them in the improvement of other farms.
Acceptance of the Amendments would not necessarily cost the Government a penny. When a farm sale does not take place as a result of the Bill, no question of Capital Gains Tax will arise. The only effect of the Bill, unchanged by these Amendments, will be to contribute to the impoverishment of our natural resources at a time when everything possible ought to be done to stimulate greater productivity on the land, to reduce our dependence on imports and to assist our balance of payments. I hope, therefore, that the Financial Secretary will show how enlightened he is by accepting these Amendments, which, I am sure, he will find irresistible.

Mr. Scott-Hopkins: The Financial Secretary's reply to my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne) was extremely disappointing. He seemed to base his whole argument on Amendment No. 74. That is an entirely separate matter. My right hon. Friend's Amendment is drawn very narrowly, and the Financial Secretary ought to realise that an ability to switch between horticulture, forestry and agriculture, if need requires, is essential to the countryside and to those who are engaged in farming of any kind. I hope that he will reconsider his decision not to accept my right hon. Friend's Amendment because it is vital that it should be possible to switch between these different types of farming which go hand in hand.

Mr. Peter Walker: I was shocked by the Financial Secretary's observation, in arguing against acceptance of the Amendment spoken to by my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne), that Amendment No. 74—I presume that that is the one he meant—was so wide as to be unacceptable. If that is what he meant, I can only express sincere regret that the Government have determined not to accept the proposition that, for the purposes of Clause 31, all forms of retail outlet or shop should be regarded as one trade. We are not suggesting any relaxation of the Capital Gains Tax in this respect, because Clause 31 applies only to defer liability to tax. But the Government, apparently, insist that Clause 31 shall not apply to the case of a grocer who, for instance, decides to sell his business in order to become the proprietor of a sweet shop or sweet and confectionery shop.
I cannot believe that the Government want to be so strict on the interpretation of Clause 31 as to say that a genuine transfer from one form of retailing to another should not enjoy the benefit of the Clause. Surely the House will agree that the basic skills involved in being a retailer are very similar. In the case I quoted of a grocer becoming the proprietor of a sweet and confectionery shop, the skills required are almost identical. He is for all practical purposes continuing the same trade and type of activity. Take the case of someone with a clothing shop who decides to buy a shoe shop. There are many similar examples. There is a tremendous identity of the types of skill involved in any form of retail outlet.
It will be against the whole spirit of the Clause if the Government stick rigidly to the definition that if one is to move from one shop to another an identical type of product must be sold in the shops. It is unreasonable. It has caused a great deal of consternation and anxiety among various organisations representing the retail traders. The Amendment would cost the Government nothing. It would eliminate what would otherwise be a considerable hardship on a retailer deciding to change the nature of the products he will sell. I should have thought it was an Amendment which the Government could readily have accepted. We consider this of such importance that I shall certainly urge my hon. Friends to divide

the House if the Government do not accept it.

Mr. J. E. B. Hill: I want briefly to mention a class of persons who reduce the Clause as it stands, with the Government Amendment, to absurdity—sub-postmasters, of whom there are 23,000. They are hard to recruit, and their Post Office salary does not of itself usually provide a livelihood, so that the sub-postmastership, which is an appointment and not a trade, is linked to some ancillary retail business.
If the sub-postmaster wishes to go up in his employment, he may in moving from a larger sub-postmastership, have to change to a different ancillary business, say from a tobacconist's to a sweet shop. As the Clause stands, and as the Financial Secretary has been good enough to tell me in correspondence, the sub-postmaster seeking to move may be penalised by the incidence of the Capital Gains Tax, so much so as to make a move unremunerative.
Some sub-postmasters are in a happy position, particularly in rural constituencies, because their business will be linked to a general village store, but some of their colleagues may find themselves caught by the tax at the very moment when they want to move up in their careers. I therefore ask the Financial Secretary for this very limited purpose to consider that the small retail businesses should be one trade for the purpose of this tax.

Mr. David Mitchell: I represent a constituency which has two expanded towns in it—Basingstoke and Andover. There is a tremendous need, with the incoming population, to bring in more shopkeepers. I very much fear that the Clause will reduce the number of shopkeepers who will move from one form of shopkeeping to another.
After all, the skill which is required to be a shopkeeper is very much the same whatever one's actual business—in buying one's goods, stocking them, taking care of them, building up custom, selling them and delivering them to one's customers. I cannot see that the skill required is very different. I should have thought that in as much as the Financial Secretary accepts that husbandry is a profession, whatever part it takes, equally one should accept


that a shopkeeper is a shopkeeper whether he is selling grocery, shoes or whatever it may be.
I know that the Chancellor would wish his Bill to have a large measure of logic and common sense in it. [HON. MEMBERS: "Oh."] I ask him simply, where is the logic and common sense about this?
How does he justify the following? A market gardener who grows and sells vegetables can become a pig farmer, but a greengrocer who sells vegetables cannot become a pork butcher. What is the logic in that?

Hon. Members: Answer.

Mr. MacDermot: Will the hon. Gentleman give way? I am being asked to answer. His hypothesis is wrong—[HON. MEMBERS: "Why?"]—because a horticulturist cannot transfer in the way the hon. Gentleman suggests without transferring to a different trade.

Mr. Mitchell: But when I raised this in Committee I was quite clearly told by the Financial Secretary that a market gardener could transfer to poultry farming. If he likes to look up the record he will find that he made it quite clear that husbandry was a trade.

Mr. MacDermot: If the hon. Gentleman had been present in the House when we were discussing this group of Amendments earlier he would have heard his right hon. Friend explain that I had corrected that mis-statement in a letter and that one of the right hon. Gentleman's reasons for moving the Amendment was to enable that correction to be made clear to the House.

Mr. Mitchell: I am very grateful for that clarification, but would the hon. and learned Gentleman, then, clarify and show the logic of this, that an arable farmer growing corn can become a poultry farmer, but a baker selling corn is not allowed to become the village grocer? What is the logic of that? I will very readily give way to the hon. and learned Gentleman to hear his reply. What about the dairy farmer who can, presumably, become a flower grower, while the dairyman cannot become a florist? Where is the logic? An export merchant can become an import merchant, presumably to the disadvantage of the balance of payments, but on the other hand a

distributor of imported German goods cannot become a producer of precision engineering goods for export. What is the common sense? What is the logic? We have not had the Chancellor or the Financial Secretary explain that.
I think that we should have some logic put into this, and I would, with great respect, suggest that our Amendment regarding retailers ought to be accepted by the Government in view of the fact that the skill which is required is the same skill although the goods to be sold may be different.

Mr. MacDermot: I can assure the hon. Gentleman that we do not want to do anything to prevent a pig farmer from being a butcher, a baker or a candlestick maker, or, as one of my hon. Friends suggested, a ballet dancer, if he wants to, but if he does so he will cease to be carrying on the same trade. I was asked to explain the logic behind it. The logic behind it is that this is a Clause dealing with the transfer of business of a person who is carrying on the same trade. What we are being asked and pressed to do, as we are on every occasion whenever any sort of concession is granted, is immediately to extend it. Then we are asked what the principle is. I am telling hon. Members what the principle is. Because they are seeking by their Amendment to extend beyond the principle, we cannot accept the Amendment.
The effect of this extension they are suggesting amounts to saying that in the case of a man who is in business no Capital Gains Tax ought to be payable on realised gains unless the money is withdrawn from the sphere of business altogether, or, failing that, till the trader in question dies.
12 m.
That is not what we envisage to be the scope or purpose of the Clause which, as I have repeatedly said, is intended to ensure that the operation of this tax will not serve to prevent that kind of redeployment of industry. It is concerned primarily with the redeployment of industry, and with it other commercial and business activities, to ensure that there is what we all want to see, the full development of the resources of the different areas of the country. It is not intended as a means of enabling a person who ceases to carry on


a trade to realise the assets of that trade and then to reinvest them in some other without being liable for tax on such capital gains as he may have made in the first trade.
The hon. Member for Edinburgh, North (The Earl of Dalkeith) sought to widen the matter still further by taking it out of the sphere of trade altogether and asking that the same kind of privilege should be extended to a property owner who is managing an estate and who is not carrying on any kind of business. This would lead us even further away from what is the underlying purpose and principle of the Clause, and I must therefore advise my hon. Friends to reject the Amendment.

Mr. Heath: It is quite clear that the whole House is thoroughly dissatisfied with the Financial Secretary's answer. I have been watching the faces of hon. Ladies and Gentlemen opposite, some of whom have had much experience in these matters, and they are obviously giving no support whatever to the hon. and learned Gentleman who has given us a circular argument that because the Clause is limited in the way that he described, it ought to remain limited and not be widened. This does not seem to be a very powerful argument.
We have had a number of contributions which have completely undermined the hon. and learned Gentleman's position. We had a contribution from my hon. Friend the Member for Basingstoke (Mr. Mitchell), who, as the House recognises, is both persuasive and intelligent, but, if I may say so, he based his argument on one great fallacy. As he has been in the House for only a limited time, perhaps this is pardonable. The fallacy is that the Labour Government and the Financial Secretary in particular are as intelligent and as logical as he is. The Financial Secretary immediately leapt to his feet and denied this proposition and pointed out that he was refusing to be logical because he did not want to widen the Clause.

It is apparent to us all that the sensible thing to do in this case is to adopt Amendment No. 74, which would embody my right hon. Friend's Amendment, and to allow those who want to change in the retail trade to do so. This is the obvious, sensible thing to do, and it could not involve any abuse. I believe that the Financial Secretary recognises this, and certainly the Chancellor does. Against this brick wall of failure of comprehension, we have no alternative but to divide the House.

I notice that tonight the Treasury Bench is much better equipped for this performance. It is true that the Prime Minister is not here, but the Leader of the House is. He is waiting there ready to advise his right hon. Friend the Chancellor what to say in the event of another defeat. A few minutes ago the Secretary of State for Education and Science was present, presumably to advise the right hon. Gentleman on the good English in which to put the phrase, or even possibly to step into the Chancellor's shoes—we do not know. We also have the Minister for Sport present to advise the right hon. Gentleman which way to make a dash for it when it all happens. Rather than make all these elaborate preparations at the hour of midnight, would not it be better to be sensible and to accept the Amendment? If they cannot do so, we must divide the House.

Amendment agreed to.

Further Amendments made: In line 36, leave out "or vocation" and insert "vocation, office or employment".

In line 38, leave out "'and vocation'" and insert "'vocation', 'office' and 'employment'".—[Mr. MacDermot.]

Amendment proposed, In page 39, line 7, at end insert:
(12) For the purposes of this section all forms of retail sales shall be considered to be one trade.—[Mr. Peter Walker.]

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 270, Noes 276.

Division No. 244.]
AYES
[12.8 a.m.


Agnew, Commander Sir Peter
Astor, John
Barlow, Sir John


Alison, Michael (Barkston Ash)
Atkins, Humphrey
Batsford, Brian


Allan, Robert (Paddington, S.)
Awdry, Daniel
Bell, Ronald


Allason, James (Hemel Hempstead)
Baker, W. H. K.
Bennett, Sir Frederic (Torquay)


Amery, Rt. Hn. Julian
Balniel, Lord
Berkeley, Humphry


Anstruther-Gray, Rt. Hn. Sir W.
Barber, Rt. Hn. Anthony
Berry, Hn. Anthony




Biffen, John
Grimond, Rt. Hn. J.
Nicholson, Sir Godfrey


Biggs-Davison, John
Gurden, Harold
Noble, Rt. Hn. Michael


Birch, Rt. Hn. Nigel
Hall, John (Wycombe)
Nugent, Rt. Hn. Sir Richard


Black, Sir Cyril
Hall-Davis, A. G. F.
Onslow, Cranley


Blaker, Peter
Hamilton, Marquess of (Fermanagh)
Orr, Capt. L. P. S.


Bossom, Hn. Clive
Hamilton, M. (Salisbury)
Orr-Ewing, Sir Ian


Bowen, Roderic (Cardigan)
Harris, Frederic (Croydon, N.W.)
Osborne, Sir Cyril (Louth)


Box, Donald
Harris, Reader (Heston)
Page, John (Harrow, W.)


Boyd-Carpenter, Rt. Hn. J.
Harrison, Brian (Maldon)
Page, R. Graham (Crosby)


Boyle, Rt. Hn. Sir Edward
Harvey, John (Walthamstow, E.)
Pearson, Sir Frank (Clitheroe)


Braine, Bernard
Harvie Anderson, Miss
Peel, John


Brewis, John
Hastings, Stephen
Percival, Ian


Brinton, Sir Tatton
Hawkins, Paul
Peyton, John


Brooke, Rt. Hn. Henry
Hay, John
Pickthorn, Rt. Hn. Sir Kenneth


Brown, Sir Edward (Bath)
Heald, Rt. Hn. Sir Lionel
Pike, Miss Mervyn


Bruce-Gardyne, J.
Heath, Rt. Hn. Edward
Pitt, Dame Edith


Bryan, Paul
Hendry, Forbes
Pounder, Rafton


Buchanan-Smith, Alick
Higgins, Terence L.
Powell, Rt. Hn. J. Enoch


Buck, Antony
Hill, J. E. B. (S. Norfolk)
Price, David (Eastleigh)


Bullus, Sir Eric
Hirst, Geoffrey
Prior, J. M. L.


Burden, F. A.
Hobson, Rt. Hn. Sir John
Quennell, Miss J. M.


Butcher, Sir Herbert
Hooson, H. E.
Ramsden, Rt. Hn. James


Buxton, Ronald
Hopkins, Alan
Redmayne, Rt. Hn. Sir Martin


Campbell, Gordon
Hordern, Peter
Rees-Davies, W. R.


Carlisle, Mark
Hornby, Richard
Renton, Rt. Hn. Sir David


Carr, Rt. Hn. Robert
Hornsby-Smith, Rt. Hn. Dame P.
Ridsdale, Julian


Cary, Sir Robert
Hunt, John (Bromley)
Roberts, Sir Peter (Heeley)


Channon, H. P. G.
Hutchison, Michael Clark
Rodgers, Sir John (Sevenoaks)


Chataway, Christopher
Iremonger, T. L.
Roots, William


Chichester-Clark, R.
Irvine, Bryant Godman (Rye)
Royle, Anthony


Clark, Henry (Antrim, N.)
Jenkin, Patrick (Woodford)
St. John-Stevas, Norman


Clark, William (Nottingham, S.)
Jennings, J. C.
Sandys, Rt. Hn. D.


Clarke, Brig. Terence (Portsmth, W.)
Johnson Smith, G. (East Grinstead)
Scott-Hopkins, James


Cole, Norman
Jones, Arthur (Northants, S.)
Sharples, Richard


Cooke, Robert
Jopling, Michael
Sinclair, Sir George


Cooper, A. E.
Joseph, Rt. Hn. Sir Keith
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Cooper-Key, Sir Neill
Kaberry, Sir Donald
Smyth, Rt. Hn. Brig. Sir John


Cordle, John
Kerby, Capt. Henry
Soames, Rt. Hn. Christopher


Corfield, F. V.
Kerr, Sir Hamilton (Cambridge)
Spearman, Sir Alexander


Costain, A. P.
Kilfedder, James A.
Speir, Sir Rupert


Courtney, Cdr. Anthony
Kimball, Marcus
Stainton, Keith


Craddock, Sir Beresford (Spelthorne)
King, Evelyn (Dorset, S.)
Stanley, Hn. Richard


Crawley, Aidan
Kirk, Peter
Steel, David (Roxburgh)


Crosthwaite-Eyre, Col. Sir Oliver
Kitson, Timothy
Stodart, Anthony


Crowder, F. P.
Lagden, Godfrey
Studholme, Sir Henry


Curran, Charles
Lambton, Viscount
Talbot, John E.


Currie, G. B. H.
Lancaster, Col. C. G.
Taylor, Sir Charles (Eastbourne)


Dalkeith, Earl of
Langford-Holt, Sir John
Taylor, Edward M. (G'gow, Cathcart)


Dance, James
Legge-Bourke, Sir Harry
Teeling, Sir William


Davies, Dr. Wyndham (Perry Barr)
Lewis, Kenneth (Rutland)
Temple, John M.


d'Avigdor-Goldsmid, Sir Henry
Litchfield, Capt. John
Thatcher, Mrs. Margaret


Dean, Paul
Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)
Thomas, Sir Leslie (Canterbury)


Digby, Simon Wingfield
Lloyd, Ian (P'tsm'th, Langstone)
Thompson, Sir Richard (Croydon, S.)


Dodds-Parker, Douglas
Longden, Gilbert
Thorpe, Jeremy


Doughty, Charles
Loveys, Walter H.
Tiley, Arthur (Bradford, W.)


Drayson, G. B.
Lubbock, Eric
Tilney, John (Wavertree)


du Cann, Rt. Hn. Edward
McAdden, Sir Stephen
Turton, Rt. Hn. R. H.


Eden, Sir John
Mackenzie, Alasdair (Ross &amp; Crom'ty)
van Straubenzee, W. R.


Elliot, Capt. Walter (Carshalton)
Mackie, George Y. (C'ness &amp; S'land)
Vaughan-Morgan, Rt. Hn. Sir John


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
McLaren, Martin
Vickers, Dame Joan


Emery, Peter
Maclean, Sir Fitzroy
Walder, David (High Peak)


Eyre, Reginald
Macleod, Rt. Hn. Iain
Walker, Peter (Worcester)


Farr, John
McMaster, Stanley
Walker-Smith, Rt. Hn. Sir Derek


Fell, Anthony
McNair-Wilson, Patrick
Wall, Patrick


Fisher, Nigel
Maginnis, John E.
Walters, Dennis


Fletcher-Cooke, Charles (Darwen)
Marples, Rt. Hn. Ernest
Ward, Dame Irene


Fletcher-Cooke, Sir John (S'pton)
Marten, Neil
Weatherill, Bernard


Foster, Sir John
Mathew, Robert
Webster, David


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Maude, Angus
Wells, John (Maidstone)


Fraser, Ian (Plymouth, Sutton)
Maudling, Rt. Hn. Reginald
Whitelaw, William


Galbraith, Hn. T. G. D.
Mawby, Ray
Williams, Sir Rolf Dudley (Exeter)


Gammans, Lady
Maxwell-Hyslop, R. J.
Wills, Sir Gerald (Bridgwater)


Giles, Rear-Admiral Morgan
Maydon, Lt.-Cmdr. S. L. C.
Wilson, Geoffrey (Truro)


Gilmour, Ian (Norfolk, Central)
Meyer, Sir Anthony
Wise, A. R.


Gilmour, Sir John (East Fife)
Mills, Peter (Torrington)
Wolrige-Gordon, Patrick


Glover, Sir Douglas
Mills, Stratton (Belfast, N.)
Wood, Rt. Hn. Richard


Godber, Rt. Hn. J. B.
Miscampbell, Norman
Woodhouse, Hn. Christopher


Goodhart, Philip
Mitchell, David
Wylie, N. R.


Gower, Raymond
Monro, Hector
Yates, William (The Wrekin)


Grant, Anthony
More, Jasper
Younger, Hn. George


Grant-Ferris, R.
Morrison, Charles (Devizes)



Gresham Cooke, R.
Mott-Radclyffe, Sir Charles
TELLERS FOR THE AYES:


Grieve, Percy
Munro-Lucas-Tooth, Sir Hugh
Mr. Ian MacArthur and


Griffiths, Eldon (Bury St. Edmunds)
Murton, Oscar
Mr. Francis Pym.


Griffiths, Peter (Smethwick)
Neave, Airey








NOES


Abse, Leo
Grey, Charles
Milne, Edward (Blyth)


Albu, Austen
Griffiths, David (Rother Valley)
Molloy, William


Allaun, Frank (Salford, E.)
Griffiths, Rt. Hn. James (Llanelly)
Monslow, Walter


Alldritt, Walter
Griffiths, Will (M'chester, Exchange)
Morris, Alfred (Wythenshawe)


Atkinson, Norman
Gunter, Rt. Hn. R. J.
Morris, Charles (Openshaw)


Bacon, Miss Alice
Hamilton, James (Bothwell)
Morris, John (Aberavon)


Bagier, Gordon A. T.
Hamilton, William (West Fife)
Mulley, Rt. Hn. Frederick (Sheffield Pk)


Barnett, Joel
Hamling, William (Woolwich, W.)
Murray, Albert


Baxter, William
Harper, Joseph
Neal, Harold


Bence, Cyril
Harrison, Walter (Wakefield)
Newens, Stan


Bennett, J. (Glasgow, Bridgeton)
Hart, Mrs. Judith
Noel-Baker, Francis (Swindon)


Binns, John
Hattersley, Roy
Noel-Baker, Rt. Hn. Philip (Derby, S.)


Bishop, E. S.
Hazell, Bert
Norwood, Christopher


Blackburn, F.
Healey, Rt. Hn. Denis
Oakes, Gordon


Blenkinsop, Arthur
Heffer, Eric S.
Ogden, Eric


Boardman, H.
Henderson, Rt. Hn. Arthur
O'Malley, Brian


Bottomley, Rt. Hn. Arthur
Herbison, Rt. Hn. Margaret
Orbach, Maurice


Bowden, Rt. Hn. H. W. (Leics S.W.)
Hobden, Dennis (Brighton, K'town)
Orme, Stanley


Boyden, James
Holman, Percy
Oswald, Thomas


Braddock, Mrs. E. M.
Horner, John
Owen, Will


Bradley, Tom
Houghton, Rt. Hn. Douglas
Page, Derek (King's Lynn)


Bray, Dr. Jeremy
Howarth, Harry (Wellingborough)
Paget, R. T.


Broughton, Dr. A. D. D.
Howell, Denis (Small Heath)
Palmer, Arthur


Brown, Rt. Hn. George (Belper)
Howie, W.
Pannell, Rt. Hn. Charles


Brown, Hugh D. (Glasgow, Provan)
Hoy, James
Pargiter, G. A.


Buchan, Norman (Renfrewshire, W.)
Hughes, Cledwyn (Anglesey)
Park, Trevor (Derbyshire, S.E.)


Buchanan, Richard
Hughes, Emrys (S. Ayrshire)
Parkin, B. T.


Butler, Herbert (Hackney, C.)
Hughes, Hector (Aberdeen, N.)
Pavitt, Laurence


Butler, Mrs. Joyce (Wood Green)
Hunter, Adam (Dunfermline)
Pearson, Arthur (Pontypridd)


Callaghan, Rt. Hn. James
Hunter, A. E. (Feltham)
Peart, Rt. Hn. Fred


Carmichael, Neil
Hynd, H. (Accrington)
Pentland, Norman


Chapman, Donald
Irving, Sydney (Dartford)
Perry, Ernest G.


Coleman, Donald
Jackson, Colin
Popplewell, Ernest


Conlan, Bernard
Janner, Sir Barnett
Prentice, R. E.


Corbet, Mrs. Freda
Jay, Rt. Hn. Douglas
Price, J. T. (Westhoughton)


Craddock, George (Bradford, S.)
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Probert, Arthur


Crawshaw, Richard
Jenkins, Hugh (Putney)
Pursey, Cmdr. Harry


Cronin, John
Johnson, Carol (Lewisham, S.)
Randall, Harry


Crosland, Rt. Hn. Anthony
Johnson, James (K'ston-on-Hull, W.)
Rankin, John


Crossman, Rt. Hn. R. H. S.
Jones, Dan (Burnley)
Redhead, Edward


Cullen, Mrs. Alice
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Rees, Merlyn


Dalyell, Tam
Jones, J. Idwal (Wrexham)
Rhodes, Geoffrey


Darling, George
Jones, T. W. (Merioneth)
Richards, Ivor


Davies, Ifor (Gower)
Kelley, Richard
Roberts, Albert (Normanton)


Davies, S. O. (Merthyr)
Kenyon, Clifford
Roberts, Goronwy (Caernarvon)


de Freitas, Sir Geoffrey
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Robertson, John (Paisley)


Delargy, Hugh
Kerr, Dr. David (W'worth, Central)
Robinson, Rt. Hn. K. (St. Pancras, N.)


Dell, Edmund
Lawson, George
Rodgers, William (Stockton)


Dempsey, James
Leadbitter, Ted
Rogers, George (Kensington, N.)


Diamond, Rt. Hn. John
Ledger, Ron
Rose, Paul B.


Dodds, Norman
Lee, Rt. Hn. Frederick (Newton)
Ross, Rt. Hn. William


Doig, Peter
Lee, Miss Jennie (Cannock)
Rowland, Christopher


Driberg, Tom
Lever, Harold (Cheetham)
Sheldon, Robert


Duffy, Dr. A. E. P.
Lever, L. M. (Ardwick)
Shore, Peter (Stepney)


Dunn, James A.
Lewis, Arthur (West Ham, N.)
Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)


Dunnett, Jack
Lewis, Ron (Carlisle)
Short, Mrs. Renée (W'hampton, N. E.)


Edelman, Maurice
Loughlin, Charles
Silkin, John (Deptford)


Edwards, Robert (Bilston)
Mabon, Dr. J. Dickson
Silkin, S. C. (Camberwell, Dulwich)


English, Michael
McBride, Neil
Silverman, Julius (Aston)


Ennals, David
McCann, J.
Skeffington, Arthur


Ensor, David
MacColl, James
Slater, Joseph (Sedgefield)


Evans, Albert (Islington, S.W.)
MacDermot, Niall
Small, William


Evans, Ioan (Birmingham, Yardley)
McGuire, Michael
Snow, Julian


Fernyhough, E.
Mclnnes, James
Spriggs, Leslie


Finch, Harold (Bedwellty)
McKay, Mrs. Margaret
Steele, Thomas (Dunbartonshire, W.)


Fletcher, Sir Eric (Islington, E.)
Mackenzie, Gregor (Rutherglen)
Stewart, Rt. Hn. Michael


Fletcher, Ted (Darlington)
Mackie, John (Enfield, E.)
Stonehouse, John


Fletcher, Raymond (Ilkeston)
McLeavy, Frank
Stones, William


Floud, Bernard
Mahon, Peter (Preston, S.)
Strauss, Rt. Hn. G. R. (Vauxhall)


Foley, Maurice
Mahon, Simon (Bootle)
Summerskill, Hn. Dr. Shirley


Foot, Sir Dingle (Ipswich)
Mallalieu, J. P. W. (Huddersfield, E.)
Swain, Thomas


Foot, Michael (Ebbw Vale)
Manuel, Archie
Swingler, Stephen


Ford, Ben
Mapp, Charles
Symonds, J. B.


Fraser, Rt. Hn. Tom (Hamilton)
Marsh, Richard
Taverne, Dick


Freeson, Reginald
Mason, Roy
Thomas, George (Cardiff, W.)


Galpern, Sir Myer
Maxwell, Robert
Thomas, Iorwerth (Rhondda, W.)


Garrett, W. E.
Mayhew, Christopher
Thomson, George (Dundee, E.)


George, Lady Megan Lloyd
Mellish, Robert
Thornton, Ernest


Ginsburg, David
Mendelson, J. J.
Tinn, James


Gourlay, Harry
Mikardo, Ian
Tomney, Frank


Greenwood, Rt. Hn. Anthony
Millan, Bruce
Tuck, Raphael


Gregory, Arnold
Miller, Dr. M. S.
Urwin, T. W.







Varley, Eric G.
Wigg, Rt. Hn. George
Winterbottom, R. E.


Wainwright, Edwin
Wilkins, W. A.
Woodburn, Rt. Hn. A.


Walden, Brian (All Saints)
Willey, Rt. Hn. Frederick
Woof, Robert


Walker, Harold (Doncaster)
Williams, Alan (Swansea, W.)
Wyatt, Woodrow


Wallace, George
Williams, Clifford (Abertillery)
Yates, Victor (Ladywood)


Watkins, Tudor
Williams, Mrs. Shirley (Hitchin)
Zilliacus, K.


Weitzman, David
Williams, W. T. (Warrington)



Wells, William (Walsall, N.)
Willis, George (Edinburgh, E.)
TELLERS FOR THE NOES:


White, Mrs. Eirene
Wilson, Rt. Hon. Harold (Huyton)
Mrs. Harriet Slater and


Whitlock, William
Wilson, William (Coventry, S.)
Mr. Alan Fitch.

Further consideration of the Bill, as amended, adjourned.—[Mrs. Harriet Slater.]

Bill, as amended, to be further considered this day.

AGRICULTURAL WORKERS (INCOMES)

Motion made, and Question proposed, That this House do now adjourn.—[Mrs. Harriet Slater.]

12.20 a.m.

Mr. Paul Hawkins: Hon. Members will know from the Order Paper that in this debate I am going to stress the need for better farm produce prices to enable the incomes of farm workers and working farmers to rise nearer to those of their opposite numbers in industry.
I am glad to have the opportunity to speak on this subject, which vitally affects hundreds of thousands who work on the land, either as farm workers or smallholders. The object I wish to secure in this debate should, I believe, be non-controversial.
The Labour Party has said within the last 12 months that it was its aim to ensure better wages for farm workers. That was point 9 of Labour's 14-point plan for agriculture. Again, the Minister wrote in my own local paper last October, just before the election:
The main objective of Labour's new policy will be to ensure that the incomes of farmers and farmworkers move rapidly towards their industrial equivalents.
There are many reasons why I am raising this matter, and I will mention only a few. Firstly, the Price Review itself. In the farming community's view, very little is printable about this and, whatever the Minister may say, the real crux of the matter is that those living and working on the land have had their incomes cut while everyone around them has been granted increases. That is the

plain unvarnished truth, and I challenge anybody to deny it.
Since the Price Review, farmers, in common with everyone else, have seen taxation and every other cost rise. In some cases farming has had extra cost added to it which the rest of the community has not suffered. For instance, credit is extremely short and loans exceptionally dear.
In the case of loans from the Agricultural Mortgage Corporation, the farming community is paying 1 per cent. higher to borrow than the rest of the community. As a result more farms during the past few months have remained unsold than for many years past. Yet farmers are in that small minority of groups, together with pensioners and people living on fixed incomes, who are unable to pass their costs on to somebody else.
They will have to wait eight months for the next Price Review, and then, of course, we do not know whether it will be a better one or a further cut in their incomes.
The House will see, therefore, that there is little room for an increased labour bill—price increases must come first. Secondly, it is undeniable that agricultural workers' earnings—and I stress earnings—are way below the average of other workers in the country. While I do not wish to weary the House with a great many figures, some must be given to show the unfair disparity that exists between agricultural workers and other manual workers in industry. On 17th August, 1960, The Times stated in a leading article:
Farmworkers' earnings showed an average hourly figure of 3s. 9d. for men, working, on average, a 52 hour week. The average, in all manufacturing, was 5s. 10d. for a 48½ hour week. The contrast is excessive and it is natural that the drain of young countrymen into manufacturing industry continues".
That was stated five years ago, but I believe that since then the gap has widened and not narrowed.
This recent information will, I think, shock the House. It certainly shocked me. It is taken from a document containing statistics of incomes, prices and so on published by the Ministry of Labour in March of this year. It is shown that the average weekly earnings for male manual workers in agriculture was £13 6s. 9d. for a 52½ hour week. In all other categories—and 127 of them are listed—the earnings averaged £18 2s. 2d. for a 47½ hour week. In other words, there was a difference of £4 15s. 0d.—and five hours extra had to be worked for that differential.
In addition, I extracted from that document seven industrial categories which, I believe, could be found in most rural constituencies. All except one are to be found in my constituency. They include animal and poultry food manufacturing, brewing and malting, agricultural machinery and so on. The earnings of men in those industries average £17 18s. 0d. against agriculture's £13 6s. 9d. The difference there is £4 11s. 0d.
Trying, therefore, to compare the agricultural worker's wages not with the wages of someone employed in the car manufacturing industry in, say, Birmingham, but with comparable local industries, we see that there is still a very big margin of difference, and more hours must be worked. It is interesting to note from the same document that in 1965 farmworkers, in order to get the average wages for their industry, had to work two-and-a-half hours longer than they did in 1960.
It is said that the living costs of farm-workers are much less, but many of them, certainly in my constituency, now live in council houses and pay quite rapidly rising rents. Many more workers in rural areas than in urban areas must run cars to be able to do their jobs. I do not believe that the extra benefits which the farming communities in rural districts are always said to have amount to more than £1 a week.
Thirdly, I stress the fact that the small working family farmers are vitally affected in this matter as well. The labour element in their incomes is very high. If farm workers' earnings were on a par with average industrial earnings

and the farming industry were reimbursed in the Price Review for this increase, then working farmers and their families would be far better off. The major part of the price of every item produced on the farm is the labour element.
My other reason for bringing forward this subject tonight is a very serious one, and relates to something that has hit the eastern counties fairly hard—the drain of intelligent young men from agriculture. If food production is to expand—as I sincerely believe it must in the future, with rising standards and increasing population—we shall need to keep the very best of our younger men on the land. The extremely costly machinery with which our farms are now equipped needs these intelligent young men to operate it, and they deserve, and will demand, to be well paid for the work.
I often wonder whether many members of the general public realise how skilled the modern farm worker is, and how costly is the machinery that he works. In his hands are tools costing thousands of £s, and a slip in controlling, say, the temperature of a drying plant could cost a farmer very considerable sums of money. Livestock husbandry has become highly scientific, and it is extraordinary how much a good stockman needs to know about breeding, feed rationing, diseases, and so on. I believe that Norfolk pioneered the stockmen's clubs, a movement that is spreading to other counties. The keenness of the stockmen to use the latest scientific information is most gratifying.
But we are losing the keener young men. If we want to see livestock production—fat cattle, calf rearing, and so on—increase, we must do something to retain these young men on the land. The townsman's idea of the farm worker as a comic turn, with a bit of straw in his hair and a funny accent, was never true. He was always shrewd, humorous and skilled, and now he is a tip-top mechanic into the bargain, with considerable knowledge of the latest scientific and chemical advances in the industry.
I have a few suggestions to make which, if acted upon, would help to improve matters. First, the Minister should state clearly that any negotiated settlement between the National Union of


Agricultural Workers and the National Farmers' Union which brought workers' earnings more into line with those of the average manual worker would be treated at the Price Reviews as an allowable cost increase. In recent years, few wage awards have been agreed, which is bad for an industry which has had exceptionally good labour relations.
According to friends in the N.F.U., the main reason for that is the belief that a negotiated settlement on these lines would not be reimbursed, so the independent members of the wages boards are left with the job. What a pity it is—and I am sure that many people in the countryside, and not only the land owners, would agree—that the N.U.A.W., instead of asking the N.F.U. to co-operate in this matter, should have chosen this time to produce, once again, its outworn and cock-eyed theories of land nationalisation. I believe that this can only lead to friction within the industry, and I hope that the union will drop that suggestion once the pamphlet has been forgotten.
Further the Minister should also make it quite clear that the whole farming industry will have the lion's share in future increased consumption. At the same time there should be an urgent inquiry into dumping and the machinery to deal with it. Dumping destroys confidence and is rife in many sections of agriculture, in particular in potatoes in recent months. The machinery is hideously slow and completely outdated. It never seems to act until the damage has been done. Any reductions in food imports must be beneficial to the nation in our present precarious financial position and home agriculture saves more than any other section in the way of imports. Given the chance of expansion, it could save more. The Government should seriously consider the danger of allowing wide differences in prices in this country and in Europe. We have seen a gap, which ought to be closed, widened at the last Price Review. A radical change in prices when we enter Europe could be extremely harmful.
In this short speech I have tried to show the quite unjustifiable difference between earnings in agriculture and other industries; the harmful effect that this is having on agriculture and could have on the country as a whole and on our

relations with Europe; and the need for higher prices to pay for the very necessary earnings increase. I have also put forward some suggestions. These the Minister may or may not agree with, but I am certain that he will agree that there is a real problem here: the problem of losing from the land the younger skilled men. There is also the promise made by the Minister that he would bring up the earnings of small farmers and farm workers into line with industrial earnings. I hope that in his reply the Joint Parliamentary Secretary will have some constructive suggestions which will enable us to keep a sufficient labour force on the land.

12.37 a.m.

Mr. George Y. Mackie: I am tempted to intervene shortly to clear up one or two misconceptions in the mind of the hon. Member for Norfolk, South-West (Mr. Hawkins) about raising the financial status of the farmer. His party had a fair time in which to sort this matter out, but it has not been done.
The only way in which the financial standard of the farm worker will be raised is by mechanisation and the fuller use of his time. Farmers will never manage to pay farm workers decent wages if the wages are the largest proportion of the outgoings, which the hon. Member seemed to think was the case. Unless wages are only one-third of the total cost of the farm the farmer will make no money and if he is to make any profit it needs to be one in four. For this we need efficiency and education. The Minister needs to look not at dumping but at the Government's promise to provide cheap capital for farmers to improve their mechanisation and raise the standard of farm workers. That is the major point for the Minister to attend to.

12.39 a.m.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): I agree with quite a lot that the hon. Member for Norfolk, South-West (Mr. Hawkins) said. He said that there is a real problem here, but I am not sure about some of his solutions. He stressed, and the whole debate is on this, the position of the small farmer and the farm worker. He made statements, which I doubt if


he could prove, that incomes have been cut. All the figures that we have—and they have never been questioned—show that in 1964–65 incomes in agriculture were at an all-time high. The hon. Gentleman must not make statements like that unless he can prove them. In fact, incomes have not been cut. [Interruption.] There may be a reason for that, though I doubt whether it is the reason that the hon Member for Cornwall, North (Mr. Scott-Hopkins) has in mind.
The hon. Member has raised an important subject, although I am surprised that he should wish to bring it up this evening, because the Annual Review White Paper which was published less than four months ago surely made it clear that measures to deal with the problem of the low income farm were a fundamental part of the present Government's policy. Indeed, only a fortnight ago the measures we are taking were described again, with particular relation to small farmers in Wales and Northern Ireland, in debates both in the House and in the Welsh Grand Committee. The hon. Member would do well to read the reports of those debates.
I should like to take up the question of the drift from the land. We all know that this had been going on, and I think it is very debateable whether this is a bad thing or not. The hon. Member for Caithness and Sutherland (Mr. George Y. Mackie) mentioned this point, in a rather curious way, if I may say so, of agricultural income, how it is divided, and what the proportions should be. The fact is that the fewer people there are in an industry, the larger is the remaining income for those who are left in the industry. Agriculture has been of tremendous help in encouraging the release of labour by the use of mechanisation and greater efficiency.
As to wages, as the hon. Gentleman knows, these are taken into account in the Price Reviews, whether they are agreed or not. I do not think it makes any difference whether they are agreed or not. I am not sure that I agree with the hon. Gentleman's townsman's idea of agriculturists. I remember some years ago coming to London to attend a meeting at Caxton Hall. I was looking at a bill advertising the meeting and the man at the door said, "Agricultural meeting? Room 16". I did not need

to tell him which meeting I wanted. However, that is by the way.
On the question of land nationalisation and similar red herrings, I am tempted to enter into that subject but I feel that tonight is not the time. This question of the lion's share of consumption is another subject which is too long to debate tonight, but, of course, we are definitely giving the British farmer a share of the increased consumption as the demand increases. That is our policy. Machinery for dealing with dumping, I admit, is slow. This machinery was brought in by the late Government and we know what the difficulty is there.
I am grateful for a further opportunity to explain the way in which we are tackling all the problems that the hon. Member raised, such as the alleged need for higher prices for farm produce, the need to raise the incomes of the small farmers and farm workers, and so on. I should like to deal with the farm workers first. I should point out that there are perquisites enjoyed by agricultural workers, such as houses, free milk, free potatoes and that sort of thing. They are of considerable value. With regard to transport, I know that many farm workers live away from the farms in council houses, but there are still a number who live in houses on the farms, and they are often good houses.
In addition, there is something attractive about farm work and, although I know it involves long working hours, it is rather different from standing at a bench and doing repetitive work. We should appreciate this point and not consider the matter purely from a cash point of view, although I know that cash is important. Farm workers have advantages which many of their town counterparts do not have.
We can not treat argiculture as a single unit. There is a wide range of size and efficiency and an across-the-board increase in the guaranteed price will be of the most benefit to the largest producers. It is these producers who find it most profitable to expand. An across-the-board increase would therefore be an inefficient way to help the small farmer and such increases would not benefit farm incomes in the long run if they encouraged a position of over-supply leading to lower market prices. As we all know, that has happened more than once and it is a danger


that the Government must constantly guard against. To adopt the across-the-board approach and simply to raise prices would create as many problems as it would solve both for the farmer and for the Exchequer.
I might mention the position with regard to milk. Milk is of special importance to the small farmer and at the review we faced great pressure to give a very great increase in the guaranteed price. Since then milk production has continued to rise and has recently been running at a record level. The trend of production certainly does not suggest that any responsible Government could have gone further than we did. The award was as large as could be made having regard to the risk of over-expansion if it had been pitched too high.
At this year's Annual Review we took account of the complex and heterogeneous nature of our agriculture. About 70 per cent. of the industry's total output is produced by about a quarter of our holdings. These include, of course, the largest holdings which have taken advantage of technological progress and have been able to secure economies of scale. Another half of our holdings are largely part-time holdings producing only a very small part of the industry's total output. The remaining quarter are mainly small and medium-sized businesses and many of these need help to improve their management, farming techniques and marketing arrangements if they are to provide a reasonable full-time livelihood. This help we intend to give.
The Annual Review White Paper sets out our broad lines of approach. We decided first that all farmers—but small farmers especially—would benefit from the measures to encourage better marketing and co-operation and from the provision of better credit facilities. In order to improve credit, we are arranging to provide guarantees to the banks so that they may more readily make available loans both to individual farmers and also towards the marketing activities of farmers' co-operatives and groups. In addition, we are introducing grants to help co-operatives and groups which are marketing primary farm produce to extend their businesses. We are considering the possibility of wider arrangements

for promoting agricultural co-operation and group activitity.
In time to come the things we are doing will help farmers generally and in particular the small farmer. We will be laying before the House various schemes to help farm management and to increase the Small Farm Scheme to include farms from 20 acres to 125 acres. This will bring within the Scheme about another 40,000 farmers, about whom the hon. Member was speaking. But all these things take time and the hon. Member can ask his hon. Friend the Member for Cornwall, North about this as he knows this to be so, particularly with a heavy legislative programme. Despite the reverses last night we are going to do it and I can assure the hon. Member that he will be perfectly satisfied with the action which we take in the future. It will be to the benefit of agriculture and the small farmer in particular as well as the farm worker.

12.49 a.m.

Mr. James Scott-Hopkins: What a most unsatisfactory answer to my hon. Friend's well-argued case which he put so clearly. Much as I admire the Parliamentary Secretary's pleasantness of delivery, all he has done is promise us jam tomorrow and nothing today. He has spoken of more reviews going on and said that we will get an answer some time. Strange announcements have been appearing in the Press, as a result, I suppose, of inspired leaks to try the temperature.
The Parliamentary Secretary did not answer a single one of the questions so extremely well thought out in the closely argued speech of my hon. Friend highlighting the difficulties in Norfolk which were of relevance to his constituents. The hon. Gentleman gave us the old menu once again, which we have been getting even since the Price Review.

The Question having been proposed after Ten o'clock on Wednesday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at ten minutes to One o'clock.